EUR/USD Struggles to Rebound Amid Risk Aversion Ahead of Fed Decision

EUR/USD Struggles to Rebound Amid Risk Aversion Ahead of Fed Decision

The EUR/USD currency pair attempts to recover on Wednesday after a sharp decline the previous day but remains below the 1.1500 level. Rising geopolitical tensions in the Middle East, escalating oil prices, and global trade uncertainties continue to weigh heavily on market sentiment.

Geopolitical Risks and Rising Oil Prices Pressure the Euro

As the Israel-Iran conflict enters its sixth day, the US administration adopts a tougher stance, with officials hinting at possible military action against Iran to force a complete surrender. This has heightened investor fears of a broader regional conflict, leading to increased demand for safe-haven assets, including the US Dollar.

Oil prices surged over $3 to around $75.00 per barrel, up 16% from May levels. This rise poses additional challenges to the Eurozone, a net importer of crude oil, potentially slowing down the region’s economic growth.

US Economic Data and Fed Watch

US Retail Sales data revealed the negative effects of trade tensions on the US economy, although the US Dollar showed only a marginal reaction, overshadowed by geopolitical concerns.

Market attention now centers on the Federal Reserve’s monetary policy announcement and Chair Jerome Powell’s outlook on managing slowing growth and inflation risks. Any changes in the Fed’s guidance or dot plot could significantly influence US Dollar direction.

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