FX OVERVIEW
Geopolitical risk and the oil shock dominated the FX backdrop: attacks on shipping near the Strait of Hormuz and strikes on Russian energy infrastructure pushed Brent to $110/bbl. The resulting risk aversion and higher energy costs favor the dollar over energy-importing currencies, particularly the euro; no FX technical levels were cited.
MAJOR PAIRS
EURUSD — Higher oil prices increase the terms-of-trade burden on Europe, while escalating geopolitical risk supports demand for the dollar. The news flow tilts EURUSD lower.
MACRO DRIVERS
- Energy risk premium: Hormuz shipping attacks and strikes on Russian refineries are driving oil higher and raising the risk of further supply disruption.
- Risk sentiment: Uncertainty around sanctions policy and deteriorating Western alliances adds to demand for defensive dollar exposure.
- Trade and energy costs: Sustained oil strength would weigh more heavily on energy-importing economies such as the euro area.
POSITIONING IDEAS
- Bearish: EURUSD — Higher oil prices worsen Europe’s external energy-cost outlook, while geopolitical uncertainty supports the dollar.