Euro down on middle east worries

The Euro (EUR) is under increasing bearish pressure on Tuesday. The risk-averse sentiment – with investors paring back hopes of rate cuts in 2024 – and the explosive situation in the Middle East, are rushing traders into safe assets and weighing on the common currency.

The sharper-than-expected deterioration of the NY Fed Empire State Manufacturing Index has failed to dent the US Dollar’s bullish momentum. Investors' focus is now on the Fed Waller a board member and a hawk, whose dovish comments in December triggered a significant Dollar slide and boosted hopes of interest rate cuts in the coming months.

In the Eurozone, the hawkish comments from the European Central Bank (ECB) Governors François Villeroy de Galhau and Joachim Nagel have given some support to the common currency. Beyond that, German CPI accelerated in December, offsetting concerns about the weak GDP figures seen on Monday, and the German ZEW survey reported an improvement in the German and Eurozone economic sentiment in January.

Nevertheless, the market sentiment remains sour. Investors are paring back hopes of aggressive rate cuts and the deterioration of the situation in the Red Sea, which is threatening to disrupt global commerce, and boost transport costs, is weighing risk appetite further. This is acting as a tailwind for the US Dollar.