Danske Research Team notes that risk sentiment has deteriorated after fresh United States (US) strikes on Iran, pushing EUR/USD below 1.16. The team highlights that higher Oil prices and yields are weighing on broader risk assets. They also flag upcoming US Personal Consumption Expenditures (PCE) Price Index data as important for FX markets, including EUR/USD.

Risk sentiment weighs on Euro

"Risk sentiment turned negative overnight on reports that the US has conducted new strikes on Iran. The EUR/USD has dropped below 1.16 and Brent oil rose from yesterday's low of USD 94.25 /bbl towards USD 98/bbl."

"In the euro area, the ECB publishes the minutes from its April meeting today. Given recent comments from Governing Council members, the minutes are likely to reflect increasingly hawkish discussions around further policy hikes."

"Also in the euro area, May business sentiment indicators are released, with particular attention on firms' selling price expectations, which saw the largest monthly increase in the survey's 25-year history last month. We are looking to see if the rising expectations continue."

"The figure increased 3.2% y/y in March, well above the Fed's 2% target, with markets expecting the price pressure to continue in the April figures. Also in the US, the second GDP estimate is released."

"In the US, the April PCE inflation figures will be released, which is the Fed's preferred gauge of underlying inflation in the US."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)