The Euro to Dollar (EUR/USD) exchange rate spiked higher on Friday following weaker than expected US jobs data, but there was a quick reversal with the pair sliding to 3-month lows just above the 1.1500 level before trading around 1.1560 as Middle East developments have dominated.
ANZ notes important EUR/USD support at 1.15, but expects further short-term losses to 1.14 as markets remain in a risk-averse mode in the short term.
The dollar has secured defensive support from the slide in risk appetite. The jump in oil prices has also undermined the Euro in global markets while there has been defensive dollar demand.
ANZ notes that a jump in energy prices tends to undermine the Euro, most notably in 2022 after the Russian invasion on Ukraine. The bank expects that a prolonged increase in energy prices would increase stagflation fears and trigger further Euro losses.
The bank also notes that there has been a shift in derivatives markets with a notable increase in demand for dollar calls and Euro puts which suggests that global investors see greater scope for a Euro retreat which will hamper the single currency in spot markets.
