EUR/USD: Oil offers relief while fiscal risks persist – BBH

After briefly trading near 1.1130, EUR/USD has rebounded towards resistance at 1.1200, according to Brown Brothers Harriman (BBH). Lower oil prices have supported the recovery by reducing the energy-related drag on Eurozone growth. Despite the more favourable energy backdrop and improved risk sentiment, the pair remains vulnerable: the bank cautions that France’s continuing fiscal difficulties could still send EUR/USD down to 1.1000.

Lower oil prices support EUR/USD as French fiscal risks persist

"EUR/USD recovered towards resistance at 1.1200 after testing an intra-day low around 1.1130 on Friday. Lower crude oil prices ease the energy drag on Eurozone growth and offers EUR support. However, France’s ongoing fiscal troubles can still drive EUR/USD down to 1.1000."

"Both contenders for the ECB presidency struck a pragmatic tone in newspaper interviews. Netherlands’ Klaas Knot noted that further tightening should be limited if energy prices remained roughly where they were, while signaling readiness to tackle disorderly bond market moves. Spain’s Pablo Hernandez de Cos stressed the “need to remain vigilant about inflation risks” but noted that second-round effects have yet to emerge."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)