Investors are selling risky assets and moving to the safe-haven dollar as the United States prepares for a possible military strike against Iran, according to Bloomberg.
The single European currency has fallen to its lowest level in a month. Investors are selling risky assets and moving to the safe-haven dollar as the United States prepares for a possible military strike against Iran, according to Bloomberg.
The EUR/USD pair is trading around $1.1765. The euro has fallen for 8 of the last 9 trading sessions, with a weekly decline of about 0.8%, the worst performance in three months.
Donald Trump gave Iran a maximum of 15 days to conclude a nuclear deal. The United States is conducting the largest military buildup in the region since 2003. The risk of war has pushed oil prices to a six-month high, which traditionally benefits the dollar as a safe-haven currency.
In addition, strong economic data has led traders to reduce their expectations of a Fed rate cut, which also strengthens the dollar.
Analysts at ING Bank believe that the euro is still overvalued, and geopolitical risks are not fully priced in. It is predicted that in the event of a serious escalation, the EUR/USD pair may fall to 1.16.
The sentiment in the options market has become the most bearish since October. The main bets on a decline are concentrated around the $1.17 mark, but interest is already shifting towards the $1.15 level. Most of these bets expire within a month, indicating a fear of a short-term collapse rather than a long-term trend.