Betting that the EUR/USD closes above 1.1520 by 3pm today seems like a very conservative bet. The spot around 4:20 am was 1.1582 and I calculated a forward price for tomorrow at 1.1860, so why so bloody conservative?
In short, the events in Western Asia aka the Middle East are hard to ascertain in terms of impacts over the remainder of the week much less the next 12 hours or so. Thus, I have no way of definitively determining what the US role will be in the conflict.
Right now, President Trump wants to sound like a peace broker forecasting that peace between Israel and Iran will happen soon. I have no data that supports the President’s optimism. The war of words between Israel and Iran doesn’t tell me that they will be sitting at the table singing kumbaya anytime this week.
Nor do I see Western Europe intervening, at least not on a kinetic basis. Europe, although seeing decreases lately in energy costs, is energy dependent and with the Russia-Ukraine conflict threatening energy delivery to the Eurozone, the last thing Europe may want to see is the Israel-Iran spat putting a chokehold on another source of energy.
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Intervention could provide a boost to the euro as a result of wartime spending but could also weaken the currency if European intervention results in a higher-than-expected number of body bags heading to Paris or Berlin along with a weakening of the industrial base.
I see American intervention driving up demand for USD as investment in industrial production would call for more expenditures on human and capital inputs.
In the end, I don’t know for sure, thus my conservative estimate.
Alton Drew
16 June 2025
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