Euro Falls as Geopolitical Tensions Escalate Amid Hawkish Fed
The euro started the new week on the back foot as geopolitical tensions continue to escalate. The EUR/USD pair opened Monday at around 1.1470, a slight decline from Friday's modest rebound near 1.1450.
The region is facing dual pressure from Russia's hybrid threats and rising tensions in the Middle East. Last week, French President Macron issued a warning that Russia may launch hybrid operations against NATO countries supporting Ukraine in the coming months.
This has dampened investor appetite for eurozone assets, contributing to the euro's weakness against the dollar. Meanwhile, the U.S. dollar is benefiting from safe-haven demand due to the Fed's hawkish stance and market expectations of a rate hike in October.
ING Groep has set its year-end 2026 target for EUR/USD at 1.1600, citing short-term interest rate differentials, oil prices, and global risk sentiment as primary drivers. However, the bank also warns that the Fed's hawkish stance makes the euro more vulnerable against the dollar.