Societe Generale’s Kit Juckes highlights that sustained higher oil prices are likely to support the US Dollar and put pressure on the EUR/USD currency pair [1]. Juckes notes that Brent crude oil prices have returned to levels seen in early 2022 (USD 122 per barrel), a period during which EUR/USD fell sharply from around 1.13 to 0.95 [1]. He points out that concerns over the current ceasefire potentially giving way to renewed conflict could further strain global oil supplies, serving as a catalyst for the dollar to strengthen and EUR/USD to fall below the 1.14 low observed at the start of the conflict [1].
Despite these risks, Juckes maintains an end-year forecast of 1.13 for EUR/USD, attributing this outlook to the ongoing strength of the US economy and the prevailing fiscal and monetary policy mix, rather than investor sentiment towards US assets or presidential preferences [1]. He emphasizes that the prospect of a prolonged conflict, which could result in more severe energy shortages, heightened geopolitical tensions, and persistently high oil prices, has the potential to break the current currency range and drive further movement in the EUR/USD pair [1].
As of the latest update, EUR/USD has not declined further, but Juckes suggests that a renewed test of the 1.14 year-to-date low is plausible in the coming days or weeks, given the prevailing market dynamics and risks associated with oil prices and geopolitical developments [1].
CONCLUSION
Sustained high oil prices and geopolitical risks are supporting the US Dollar and pressuring EUR/USD, with analysts expecting potential further declines in the currency pair. Societe Generale maintains a year-end EUR/USD forecast of 1.13, citing US economic strength and policy factors as key drivers. Market participants should remain alert to further oil price shocks and geopolitical developments that could impact currency movements.