The Euro to US Dollar (EUR/USD) exchange rate weakened by more than 0.90% on Monday as concerns over escalating violence in the Middle East and worries over a possible Greek default bolstered support for the safe haven ‘Greenback’.
The Euro to US Dollar (EUR/USD) exchange rate touched a session low of 1.1335
The US Dollar rallied as it recovered from recent losses suffered in the previous week. The currency found support from increased demand for safe haven assets, as investors were worried over the conflicts in the Middle East and the rising threat of a Greek exit from the Eurozone.
Over the weekend, the situation in Iraq and Yemen deteriorated. Islamic State drove Iraqi government forces out of the western city of Ramadi, the heaviest defeat Baghdad has experienced since last summer. The fighting in the city is likely to increase as it was announced that Shia militias are preparing to launch a counterattack. The Shia militias were key players in the liberation of Tikrit and were initially kept back from fighting in Ramadi due to concerns over looting. According to Reuters, a convoy of armoured vehicles was on its way to the city.
The situation in Yemen heightened investor worries as a Saudi led coalition resumed air strikes against Houthi rebels late on Sunday.
EU Military action in Libya
Euro traders were jittery over plans by the European Union to use military force to destroy boats used to smuggle refugees across the Mediterranean and into Europe.
Ministers are meeting in Brussels to discuss the plans, which could see the UK take a pivotal role in the operations. The talks come, as the EU must respond to the vast numbers of illegal migrants from Africa and the Middle East crossing the Mediterranean Sea to reach Europe. More than 1,800 migrants have died in the Mediterranean in 2015.
Before any military action can be taken, the EU needs to get permission from the United Nations.
Euro to US Dollar (EUR/USD) exchange rate was trading in the region of 1.1355
Further gains for the US Dollar against the Euro were held in check as the session progressed due to the release of yet another disappointing data release of the USA.
According to the National Association of Home Builders/Wells Fargo, its housing market index fell unexpectedly last month from a reading of 56 to 54. Economists had been expecting the index to rise to a reading of 57 last month.
The Euro could regain ground on Tuesday if Eurozone inflation and economic sentiment data comes in positively.