Renewed geopolitical tensions are set to weigh on the euro. What’s more, the EUR/USD pair points to the downside as the European Central Bank (ECB) is to remain dovish, according to economists at HSBC.

EUR to remain on the defensive

“Were things to improve on the geopolitical front, then EUR/USD could move sharply higher, though clearly renewed deterioration would also likely be echoed in a lower EUR/USD.”

“Beyond geopolitical developments, we look for EUR/USD to resume its downward trajectory over the coming weeks, amid the relative outlook for monetary policy. The ECB guidance is likely to remain mostly dovish, stressing a likely pause between the end of QE and the first rate hike in the run-up to the 14 April meeting. However, any progress towards further EU common bond issuance could be supportive.”