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USD hits weekly highs as Brent nears $91 and oil risks inflation
Saudi export risk and Houthi threats to the Bab el-Mandeb Strait are pushing Brent toward $91 per barrel, which could raise the odds of further Fed tightening, keeping EURUSD under pressure.
The US dollar is at weekly highs, supported by a safe-haven bid and higher yields on US Treasuries, according to Action Forex. Investors are also demanding a higher risk premium amid the Middle East conflict, while the Brent rally toward about $91 per barrel is seen as increasing inflation risk and reinforcing expectations for tighter US monetary policy.
The analysis points to fears that escalation could lift prices further, citing Rystad Energy estimates that about 2.5 million barrels per day of Saudi exports are at risk. It also notes that threats to block the Bab el-Mandeb Strait have heightened concerns, while Saudi Arabia’s potential workaround routes remain a partial factor limiting the move.
Reuters-reported hopes for de-escalation, including a proposed 10-day ceasefire aimed at returning to terms agreed in June, have briefly weighed on the USD. Even so, the piece says the gap between the sides remains wide, and higher oil prices raise the risk of renewed US inflation, which could keep the Fed on a hawkish path, with Bank of America forecasting three hikes later in the year.
Against that backdrop, Action Forex describes the medium-term outlook for EURUSD as bearish, though it flags that the upcoming ECB meeting could offer short-term support if Christine Lagarde adopts more hawkish rhetoric. The article adds that a 50-basis-point rise in the federal funds rate is already partly priced in, and it says no ECB deposit-rate hike is expected.
Latest closeBrent $84.94 ▼0.0%