Europe Summary and Highlights 02 March
The USD drifted slightly lower in Europe waiting for more developments from the Iran war.
The mood remains risk off, but this is being curtailed by the modest rise in oil prices. Though the USD remains firm in Europe, traders are looking beyond the initial knee jerk reaction and this prompted some profit taking on USD longs and a slight pullback in the USD. Most expect a short war of 1-2 weeks followed by a sizeable decline in oil prices, which could switch the risk off mood back to risk on. This is curtailing the scale of USD buying at the moment. However, this war is fluid, as Iran is trying to close the Straits of Hormuz and maximize the damage for Trump on the cost of living agenda. Reports suggest Iran is also using cheap weapons to reduce stockpiles of defensive weapons and keeping better missiles for later this week. Thus oil prices could still be volatile and some traders feel this could trigger a 2nd round of risk off trading that helps the USD.