Euro edges lower as oil prices rise
This comes amid Iran war uncertainty before the US Democrats take office in Congress
Published Thu, Nov 5, 2026 · 09:42 PM
THE euro eased slightly on Thursday (Nov 5) after a three-day rally, as energy prices headed higher amid uncertainty about what will happen in the war in Iran before the US Democrats take control of Congress in January.
Citi said concerns that the White House could escalate tensions with Iran persisted after the midterm elections on Tuesday.
Democrats swept to majorities in the Senate and House of Representatives, spurring gains in US Treasuries and global equities.
However, doubts remain as to whether the new Congress will be as accommodating to the artificial intelligence sector.
The euro was down 0.1 per cent at US$1.1216, after reaching US$1.1273 on Wednesday, its highest level since Oct 6. Meanwhile, the price of oil was last up 2 per cent after a three-day decline.
George Saravelos, global head of forex strategy at Deutsche Bank, said: “On balance, we see political developments overnight as supportive of a continued bottoming out in the euro/dollar: lower energy and global policy risk premium but higher AI implementation risks should on balance weaken the dollar.”
Analysts said that the euro could face renewed downward pressure.
This comes as investors temper expectations for further European Central Bank (ECB) monetary tightening while concerns linger over France’s fiscal trajectory and ability to curb budget deficits.
On Thursday, flag-waving protesters marched through French cities and public workers went on strike.
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Rising public debt and the rapid expansion of non-bank finance could curb the ECB’s ability to set the appropriate monetary policy, ECB board member Isabel Schnabel said on Thursday.
Roberto Mialich, global forex strategist at Unicredit, said: “The euro/dollar needs to break above at least US$1.1325 to convincingly ease selling pressure in the near term.”
The dollar index, which measures the greenback against a basket of currencies, rose 0.13 per cent to 101.62, after hitting 101.21 in the Asian session, the lowest since Sep 30.
Despite the political shift in the US, expectations for the Federal Reserve’s interest rate path remained largely intact.
Markets are pricing in an 80.7 per cent chance of a rate increase of at least 25 basis points from the Fed at its December meeting, according to CME FedWatch, up from 77.4 per cent in the prior session.
Sterling was little changed against both the euro and the dollar after the Bank of England raised interest rates, a move which investors did not view as the start of an aggressive tightening cycle.
It strengthened 0.1 per cent to US$1.3478 and was up 0.1 per cent at 83.28 pence against the euro.
The yen gained after minutes from the Bank of Japan’s (BOJ) September meeting, when policymakers raised rates to a 31-year high of 1.25 per cent, reinforced bets for further interest rate hikes.
The BOJ minutes showed some board members signalling a chance of faster-paced increases. Markets now widely expect the BOJ’s next hike to come in December. The yen rose 0.14 per cent to 158.18 per dollar.
The BOJ board also debated neutral rate and market pricing of the BOJ’s terminal rate, in a sign of its growing focus on how far the central bank could lift borrowing costs without cooling the economy too much. REUTERS
