EUR/USD softens below 1.1650 as Middle East turmoil boosts US Dollar
The EUR/USD pair loses ground to near 1.1620 during the early Asian session on Tuesday. The US Dollar (USD) edges higher against the Euro (EUR) on fears that a prolonged conflict in the Middle East could disrupt global energy supplies and weigh on economic growth.
Iran’s Islamic Revolutionary Guard Corps (IRGC) said that Tehran will determine when the war ends, not the United States (US). The IRGC warned that if US and Israeli attacks continue, Iran could block regional oil exports. Meanwhile, US President Donald Trump stated late Monday that he plans to waive oil-related sanctions, have the US Navy escort tankers through the Strait of Hormuz and predicted the war with Iran would resolve “very soon.”
Uncertainty and signs of no resolution between the US and Iran continue to boost a safe-haven currency such as the Greenback and act as a headwind for the major pair.
As Europe is a major net importer of energy, higher crude oil prices could push inflation higher in the region while weighing on economic growth, raising stagflation risks. Markets are now pricing in that the European Central Bank (ECB) could deliver up to two 25-basis-point (bps) rate increases this year, compared with earlier expectations that rates would remain unchanged through 2026, according to Reuters.
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