European currencies are moving into a corrective phase after failing to consolidate above key levels. The shift comes amid heightened geopolitical risks and renewed demand for safe-haven assets. Disruptions in the Strait of Hormuz and escalating tensions in the Middle East are weighing on risk sentiment, supporting the US dollar through capital inflows into more liquid instruments, while limiting upside potential for both the euro and sterling. At the same time, higher energy prices are reinforcing inflationary pressures across Europe.
Market participants remain cautious ahead of upcoming macroeconomic releases from the US, the euro area, and the UK. Anticipation of fresh data on inflation and economic activity is curbing directional momentum and increasing the likelihood of further tests of key technical levels in a mixed fundamental environment.
EUR/USD
EUR/USD once again tested the 1.1800–1.1830 resistance zone but was unable to establish a firm break above it. Technical signals on the daily chart point to the risk of a continued pullback, as reversal patterns have emerged. However, any softening in the dollar or improvement in global risk appetite could support another attempt higher towards 1.1830–1.1850.
Key events for EUR/USD:
- today at 13:00 (GMT+3): Bundesbank monthly report
- today at 17:30 (GMT+3): US crude oil inventories
- today at 20:00 (GMT+3): speech by Bundesbank President Nagel
GBP/USD
GBP/USD is also under pressure, edging closer to key support levels in line with the broader weakness in European currencies. A retest of 1.3470 appears likely, with a break lower opening the way towards 1.3380–1.3430. A move back above 1.3550 would negate the bearish outlook and suggest renewed upside potential.
Key events for GBP/USD:
- today at 09:00 (GMT+3): UK Consumer Price Index
- today at 11:05 (GMT+3): speech by Sarah Breeden (BoE)
- today at 11:30 (GMT+3): UK house price index
The FX market remains characterised by elevated uncertainty, as geopolitical developments and expectations around macroeconomic data shape a cautious tone. In the near term, market direction will largely depend on incoming news, which could either deepen pressure on European currencies or trigger short-term rebounds.
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