UniCredit says the Dollar’s limited reaction is linked to higher global bond yields, stable equity markets and weaker expectations that the Federal Reserve will raise interest rates in the near term.
The bank sees rising long-term yields outside the US as the main source of support for the Euro. In particular, stronger German Bund and Japanese government bond yields are helping major currencies withstand geopolitical pressure and are reducing the Dollar’s usual safe-haven appeal.
UniCredit also notes that the latest Federal Reserve minutes remained cautious about inflation but did not point to an imminent rate hike. At the same time, global stock markets have shown notable resilience.
Another factor is that investors have become more accustomed to changes in President Trump’s rhetoric, making them less likely to react sharply to geopolitical headlines without additional confirmation.
Despite this, UniCredit does not expect a prolonged Dollar decline until diplomatic negotiations begin to improve.
The bank believes a quick rise in EUR/USD above 1.15 remains unlikely while US-Iran talks are stalled. At the same time, the risk of the pair falling back toward this year’s low near 1.1325 remains if tensions in the region intensify.
Conclusion:
UniCredit’s forecast suggests that EUR/USD remains supported by rising bond yields outside the US and fading expectations of an imminent Fed rate hike. For investors and traders, 1.15 remains the main upside barrier, while renewed geopolitical escalation could push the pair back toward 1.1325.
