EUR/USD: Can oil relief offset lingering fiscal risks? – BBH

Lower Oil prices have supported a EUR/USD rebound towards resistance at 1.1200 by easing the energy-related drag on Eurozone growth, Brown Brothers Harriman (BBH) reports. The recovery followed a brief spell near 1.1130. Even with better risk sentiment and more favourable energy dynamics, the pair remains vulnerable: the bank cautions that France’s persistent fiscal difficulties could still drive EUR/USD down to 1.1000.

Can energy relief offset fiscal pressures?

"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.)