EUR/USD Under Pressure as Latvia Drone Shootdown Escalates NATO Tensions

EUR/USD faces renewed downside pressure as geopolitical risk in Eastern Europe intensified following Latvia's shootdown of a drone over its territory, marking a significant escalation beyond the routine alert-and-clear incidents seen throughout 2026. The event required a NATO air defence mission to neutralize the threat over sovereign NATO territory, raising concerns about broader regional destabilization along the Russia-NATO frontier. Safe-haven flows are likely to benefit the US dollar, Swiss franc, and Japanese yen at the expense of the euro and other European currencies. Traders should monitor EUR/USD for potential tests of nearby support levels as risk sentiment deteriorates. EUR/CHF may also see selling pressure as Swiss franc demand increases on haven flows. The escalation adds a geopolitical risk premium to European assets and could weigh on ECB policy expectations if economic uncertainty deepens. Near-term, traders should watch for official NATO and EU responses, which could either calm markets or further amplify volatility across EUR pairs and broader risk assets.