Euro: Outlook weakens as risks build – Rabobank

Rabobank's RaboResearch Global Economics & Markets has examined the EUR/USD dynamics since the Iran war, focusing on how changing expectations for Federal Reserve policy and the Euro's decline have contributed to the pair's movement. The shift from expectations of Fed easing to tightening has significantly boosted the USD's strength during the summer and into the previous month.

However, the weak performance of the Euro has also played a role in driving EUR/USD down since the war began. The Euro's inability to gain strength from the ECB's hawkish stance since the conflict's start has likely helped support the USD. Even though the ECB has accelerated its tightening cycle and the Eurozone economy remains resilient, the market is worried about growth risks due to the Eurozone's role as an energy importer and political uncertainties in Europe.

Consequently, many investors may view the Euro as less attractive than the USD. In contrast, the USD's rally at the start of the Iran war proved it remains a safe haven, a status many doubted last year. This is largely due to the greenback's dominance in the global payments system, which would take decades to challenge. The FXStreet Insights Team, composed of journalists curating market observations from leading experts, notes that the USD's strength at the start of the Iran war confirmed its safe haven status, which had begun to be questioned last year.