Euro: Energy repricing shapes outlook against US Dollar – ABN AMRO

FXStreet Insights Team FXStreet

ABN AMRO’s Georgette Boele notes that the Euro’s relationship with energy prices has evolved, with recent Oil and Gas gains again weighing on EUR/USD. Earlier in the US-Iran conflict, higher energy prices hurt the Euro (EUR), but later the pair became more driven by Federal Reserve (Fed) and European Central Bank (ECB) expectations. She now sees EUR/USD guided by central bank expectations, yield spreads and Eurozone energy risks.

Euro sensitivity returns to energy moves

"At the start of the US-Iran conflict, higher energy prices weighed on the euro against the US dollar. During the conflict, however, EUR/USD became less sensitive to energy prices and more sensitive to expectations for the Fed and the ECB."

"When a Memorandum of Understanding was announced, energy prices fell sharply, but the euro gained little against the US dollar because markets were focused on expectations of Fed rate hikes."

"As a result, oil and gas prices rose strongly, supporting the currencies of energy exporters such as the Norwegian krone, Canadian dollar and US dollar. At the same time, currencies of energy importers weakened."

"The euro again declined against the US dollar as energy prices rose."

"Going forward, the direction in EUR/USD will depend on expectations for the Fed and the ECB, inflation expectations, changes in nominal and real yield spreads between the US and Europe, and perceptions of possible energy shortages in the eurozone."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD treads water around 1.3360

GBP/USD alternates gains with losses around the 1.3360 zone on Wednesday. That said, Cable’s upside remains capped as markets stay cautious following the flare-up of tensions in the Middle East.

EUR/USD flirts with 1.1400; geopolitical landscape deteriorates

EUR/USD comes under renewed selling pressure, slipping toward the 1.1400 region on Wednesday. The pair’s second daily pullback in a row follows extra strengthening of the US Dollar on renewed safe-haven demand after President Trump said the MOU with Iran to end the conflict was "over".

Gold loses impulse; focus shifts back to $4,000

Gold turns lower on Wednesday and trades deep in negative territory, opening the door to another potential visit to the key $4,000 yardstick per troy ounce. The yellow metal’s decline follows a modest uptick in the US Dollar as tensions in the Middle East have resurfaced.

Pi Network crashes to a record low amid broader market stress

Pi Network (PI) price edges toward $0.1000 extending losses for the fifth straight day. Retail sentiment remains bearish as Open Interest and the funding rate decline. The technical outlook for PI is bearish as selling pressure mounts, despite oversold conditions.

Fed Minutes to shed light on Warsh's first meeting as Chair

The United States (US) Federal Reserve (Fed) will release the Minutes of the June 16-17 Federal Open Market Committee (FOMC) meeting on Wednesday at 18:00 GMT. The Minutes should shed more light on the Fed’s hawkish hold delivered at Kevin Warsh’s first meeting as Fed Chair. Even so, doubts remain about how much the minutes will reveal, given Warsh's refusal to provide forward guidance.

Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance.