The Euro fell against the US Dollar on Monday after reports of renewed attacks in the Middle East. EUR\/USD traded near 1.1690, down about 0.25% on the day.<\/p>\n
The US Dollar Index (DXY) traded around 98.47, extending Friday\u2019s rebound from near two-week lows. The United Arab Emirates was attacked by Iran for the first time since a fragile ceasefire in early April.<\/p>\n
A fire was reported at a petroleum site in Fujairah after a drone strike. The British military said two cargo vessels were ablaze off the UAE coast.<\/p>\n
Iran\u2019s Fars news agency said two missiles hit a US naval vessel near Jask after alleged IRGC warnings. A US official denied that any American vessel had been hit, according to Axios.<\/p>\n
Tehran is linked to moves around the Strait of Hormuz after US President Donald Trump announced a naval mission called \u201cProject Freedom\u201d. The mission aims to guide stranded ships out of the waterway.<\/p>\n
Oil prices have kept a geopolitical risk premium as tensions continue. Higher energy costs have lifted inflation and led central banks to keep policy tight.<\/p>\n
The CME FedWatch Tool shows the chance of a December US rate rise at about 33%, from near zero a week ago. Markets are pricing in at least two ECB rate rises, as attention turns to Friday\u2019s US Nonfarm Payrolls report.<\/p>\n
The Euro is under pressure against the US Dollar, trading around 1.0750 as renewed attacks on shipping in the Bab el-Mandeb Strait push traders into the safe-haven Greenback. The US Dollar Index (DXY) is holding firm above 104.50, reflecting broad strength. This situation is creating a difficult environment for risk assets and is reminiscent of past geopolitical flare-ups.<\/p>\n
We see this as a repeat of the pattern from 2025 when tensions between the US and Iran in the Strait of Hormuz caused a similar flight to quality. During that period, we saw the dollar strengthen significantly as geopolitical risk premium was priced into the market. It is crucial to recognize that these events tend to favor the dollar over the euro due to Europe’s higher energy import dependency.<\/p>\n
The impact is most visible in energy markets, with Brent crude prices jumping 8% in the last two weeks to over $92 a barrel. This surge is complicating the inflation picture, with the latest US core CPI data remaining stubbornly high at 3.6%. The persistent inflation is forcing a rethink of central bank policy for the remainder of the year.<\/p>\n
For us, this means the Federal Reserve is unlikely to cut interest rates soon, a major shift from expectations a month ago. In fact, futures markets now imply a 40% chance of a rate hike by September. The European Central Bank, however, is in a much tougher position, facing similar inflation but with regional GDP growth hovering near zero.<\/p>\n
Given this backdrop, derivative traders should anticipate higher volatility. One-month implied volatility on EUR\/USD has already spiked to 9.5%, making options more expensive but also more valuable for hedging. We should consider positioning for further euro weakness by buying EUR\/USD put options or using put spreads to cheapen the cost and define the risk.<\/p>\n
This “risk-off” sentiment will likely keep a lid on any EUR\/USD rallies until there is a clear de-escalation in the Red Sea. We must watch headlines from the region closely, as any positive development could cause a sharp reversal. Attention will also be on this Friday’s US jobs report, which will be critical in shaping the Fed’s next move.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Euro slips to 1.1690 as Middle East attacks lift dollar; oil risk premium keeps central banks hawkish.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-46570","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/46570","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=46570"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/46570\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=46570"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=46570"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=46570"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}