EUR/USD Weakens, Dollar Regained Benefits from Safe Haven Sentiment
The EUR/USD pair weakened as the US dollar regained its popularity as a safe haven asset amid rising global uncertainty. Market sentiment remains clouded by the Middle East conflict, while investors tend to seek refuge in the dollar after concerns over diplomatic tensions failed to fully ease. Reuters also reported that the dollar is heading for its best monthly performance since July 2025, indicating that demand for the greenback remains very strong.
In addition to the safe haven factor, rising US bond yields have also strengthened the dollar's position against the euro. Markets that had previously expected more easing are now shifting their expectations toward longer-term high US interest rates, with some market participants even starting to factor in the possibility of a rate hike. This shift in expectations makes the dollar more attractive, adding to pressure on EUR/USD.
On the other hand, the euro is also facing pressure from surging energy prices, which are increasing the risk of inflation in the eurozone. Reuters reported that ECB officials have begun to highlight the impact of rising energy costs, but for now, the European Central Bank remains cautious and is not in a hurry to raise interest rates. The combination of energy pressures, ECB caution, and dollar dominance limits the euro's potential for strengthening in the short term.
Going forward, the direction of the EUR/USD pair will be heavily influenced by developments in the Middle East conflict, oil price movements, and changes in expectations for the Fed and ECB monetary policies. As long as risk-off sentiment persists and the dollar remains investors' preferred currency, the EUR/USD pair is at risk of remaining weak. However, if there are signs of a de-escalation in the conflict or if pressure on the dollar begins to ease, the pair still has the potential for a limited rebound. (CP)
Source: Newsmaker.id
