Even without a confirmed, sustained disruption, the mere risk to a key global energy chokepoint is enough to inject a significant premium into European Gas markets. And for the Euro, that matters.
The EUR/USD pair pierced the 1.1600 mark on Tuesday, as risk aversion keeps fueling demand for the US Dollar (USD). The escalation of the Middle East crisis has finally interrupted traffic through the Strait of Hormuz, with the immediate consequence of soaring Oil prices.
A dramatic escalation of geopolitical tensions in the Middle East puts bond investors in a dilemma. In normal circumstances, investors would rush into US Treasuries, pushing prices higher and yields lower, in a classic flight to safety. Not this time.
EUR/USD extends its slide after closing deep in negative territory on Monday and closes in on 1.1600. The risk-averse market atmosphere could make it difficult for the pair to stage a rebound, despite technically oversold conditions.
The EUR/USD exchange rate tumbled this week as the US dollar rose amid the ongoing crisis in the Middle East. It also retreated as concerns about the European economy rose.
The AUD/USD pair remained in a narrow range this week as the war in the Middle East. It was trading at 0.7077 on Tuesday, down slightly from the year-to-date high of 0.7147. Focus will remain on the new developments in the Middle East, upcoming US jobs data, and Australian GDP report.