Geopolitical risks in Iran and rising crude prices pressure the Euro, offset by ECB tightening expectations ahead of Thursday’s meeting.
The Euro struggled to extend gains against the US Dollar, retreating to just above 1.1400 after failing to break 1.1420. Escalating tensions in Iran, including US airstrikes and Tehran’s warnings, fueled a risk-off mood, while a Houthi blockade in the Red Sea disrupted oil shipments, pushing crude prices higher.
The Eurozone’s sensitivity to energy costs amplified pressure on the common currency, though ECB rate hike expectations limited further declines. Analysts noted that investors are pricing a more aggressive tightening path for the ECB compared to the Federal Reserve, supporting the Euro despite geopolitical headwinds.
Markets now await the European Central Bank’s policy decision on Thursday, with focus on signals for future rate moves amid rising energy prices and regional instability.