LONDON: As the Middle East crisis fueled concerns about a persistent increase in energy costs and had a significant negative impact on global markets, investors were extremely pessimistic about the euro, and the dollar held steady near three-month highs on Wednesday.
After hitting its lowest level since late November, the euro steadied around $1.1612. This came as figures on Tuesday revealed that inflation in the eurozone increased faster than anticipated in February, prior to the onset of the Iranian dispute.Energy is the primary factor influencing the EUR/USD exchange rate, according to George Saravelos, global head of FX research at Deutsche Bank.
Wednesday saw a resumption of the selloff in financial markets as investors rushed for cash because to mounting concerns about a spike in inflation following Israeli and US forces’ bombardment of targets around Iran. After switching from an overwhelmingly optimistic posture just six weeks ago, the options market indicates that traders are at their most pessimistic about the euro in at least a year.
We’re still in a scenario where dollar selloffs are probably going to be short-lived and bought into because there is still a lot of uncertainty priced into most currencies, which are sensitive to energy prices,” said CIBC Capital Markets’ head of G10 FX strategy, Jeremy Stretch.
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