EUR/USD: Ongoing conflict maintains downward pressure – MUFG

101 finance2026/03/20 10:15

By:101 finance

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ECB's Communication Helps, But Risks Remain

Derek Halpenny from MUFG notes that the European Central Bank has managed its messaging and inflation target more effectively than the Bank of England. However, he doubts that the recent rise in short-term Eurozone yields will be enough to keep the euro strong. As the DXY index's relationship with yield spreads weakens and its connection to Brent crude prices grows, Halpenny warns that EUR/USD remains vulnerable to oil market disruptions caused by ongoing conflicts.

Short-Term Yield Gains May Not Support the Euro

“Much like our outlook for the pound, we remain unconvinced that higher short-term yields will continue to benefit the euro,” Halpenny explains.

“The link between the DXY and yield differentials has faded, while its correlation with Brent crude has strengthened. As a result, we still see downside risks for EUR/USD stemming from conflict-driven oil price movements.”

“While yield trends might limit the euro’s losses, the current shifts in yield spreads differ significantly from those seen in 2022.”

(This article was produced with AI assistance and reviewed by an editor.)

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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