The euro resumed its decline against a basket of major global currencies during European trading on Tuesday, falling against the US dollar after a three-day recovery streak and moving back toward its lowest level in 13 months. The single currency is now on track for a second consecutive monthly loss as investors continue to favor the US dollar as the preferred investment and reserve currency in the foreign exchange market.

Later today, Germany will release its June inflation report, which is expected to provide important clues about whether the European Central Bank could raise interest rates again before the end of the year.

The Price

• EUR/USD fell 0.25% to $1.1395 from an opening level of $1.1422, after touching an intraday high of $1.1426.

• The euro closed Monday up 0.35% against the US dollar, marking its third consecutive daily gain as the currency continued to recover from its 13-month low of $1.1325.

• In addition to bargain buying from lower levels, the euro also benefited from the agreement between the United States and Iran to halt hostilities and resume technical negotiations under the previously agreed 60-day framework.

Monthly performance

• For June, which officially concludes at today’s settlement, the euro is down 2.3% against the US dollar and remains on track for a second straight monthly loss.

• The decline reflects strong demand for the US dollar following the Federal Reserve’s hawkish policy meeting under its new chairman, Kevin Warsh.

• Demand for the dollar as a safe-haven alternative has also been supported by the fallout from the Iran conflict and the continued military tensions between the United States and Iran.

European interest rates

• Reports indicate that the European Central Bank is considering pausing further policy normalization in July if energy prices remain near current levels.

• Money markets continue to price roughly a 30% probability of a 25-basis-point ECB rate hike at the July meeting.

• Investors are now awaiting Germany’s June inflation data later today, which could significantly reshape expectations for European interest rates.

Euro outlook

According to Economies.com, if German inflation data comes in softer than market expectations, the likelihood of another ECB rate increase this year could decline further, potentially leading to additional losses for the euro against a basket of global currencies.

The Japanese yen weakened against a basket of major and minor currencies during Asian trading on Tuesday, extending its losses for a second consecutive session against the US dollar and falling to its lowest level since 1986. The move has fueled speculation that Japanese authorities may intervene in the foreign exchange market to defend the currency against excessive volatility.

Finance Minister Satsuki Katayama said the government remains prepared to take appropriate action against excessive exchange-rate fluctuations. Meanwhile, Chief Cabinet Secretary Minoru Kihara stated that Japan would continue efforts to build an economy that is less vulnerable to currency swings.

The Price

• USD/JPY rose 0.3% to ¥162.40, its highest level since December 1986, up from an opening level of ¥161.93. The pair touched an intraday low of ¥161.85.

• The yen ended Monday down 0.15% against the US dollar, marking its fifth loss in the last six sessions, as concerns over the widening interest-rate gap between Japan and the United States continued to weigh on the currency.

Monthly performance

• For June, which concludes officially at today’s settlement, the Japanese yen is down around 2.0% against the US dollar and is on track for a second consecutive monthly decline, as well as its largest monthly loss since October 2025.

• The monthly weakness reflects strong investor demand for the US dollar following the hawkish Federal Reserve meeting under its new chairman, Kevin Warsh.

• Rising expectations for additional Federal Reserve rate hikes this year have renewed concerns about the widening yield differential between the United States and Japan in favor of the dollar.

Japanese authorities

Japanese Finance Minister Satsuki Katayama said on Tuesday that the government stands ready to take appropriate measures against excessive currency volatility.

“That includes decisive action, as agreed between Japan and the United States,” Katayama said.

Chief Cabinet Secretary Minoru Kihara also told reporters that the government would continue efforts to reduce the economy’s exposure to exchange-rate fluctuations while remaining ready to intervene in currency markets when necessary. He declined to comment directly on the current level of the yen.

Views and analysis

• Julia Wang, Chief Investment Officer for North Asia at Nomura, said Japan could intervene in the foreign exchange market following the yen’s slide to multi-decade lows, although she expects any broader market impact to be short-lived.

• Wang added that while intervention is not officially tied to any specific exchange-rate level, a new cycle low for the yen could increase domestic concerns about currency weakness and raise the likelihood of official action.

• She noted that the broader outlook for the yen remains weak because large interest-rate and real-yield differentials between Japan and the United States continue to favor carry trades, where investors borrow cheaply in yen and invest in higher-yielding assets elsewhere.

• Matt Simpson, Senior Market Analyst at StoneX, said Japan’s Ministry of Finance would intervene if it could, but it faces a difficult challenge while moving against the tide of a hawkish Federal Reserve.

• Simpson added that if US economic data delivers a surprise in favor of monetary easing later this week, Japanese authorities could seize the opportunity to intervene more aggressively while the dollar is under pressure. Until then, intervention threats are likely to remain largely verbal.

Japanese interest rates

• Market pricing for a 25-basis-point rate increase by the Bank of Japan at its July meeting remains below 25%.

• Investors are awaiting additional inflation, labor market, and wage data from Japan that could force a reassessment of those expectations.

XRP pared some of its recent losses and traded near the $1.05 level at the time of writing on Monday, as the cross-border payments token attempted to recover from last week’s selloff, which intensified during the exchange of military strikes between the United States and Iran.

Federal Reserve and jobs report in focus

The US Federal Reserve left interest rates unchanged this month, but policymakers continue to signal that rates could move higher later this year amid concerns that inflation may remain above the central bank’s 2% target.

Investors are now awaiting ADP employment data on Wednesday and the US nonfarm payrolls report on Thursday for additional clues about the Federal Reserve’s policy outlook.

Traders currently see roughly a 60% probability of a rate hike by September.

A sustained move above the $1.05 level could help confirm a shift back toward a bullish trend, particularly as Bitcoin and Ethereum, the two largest cryptocurrencies, are also attempting to move higher.

Modest investment inflows support XRP

Spot XRP exchange-traded funds recorded net inflows on several days last week.

According to SoSoValue data, inflows into US-listed spot XRP ETFs nearly doubled to $23 million, compared with roughly $11 million the previous week.

Cumulative net inflows now stand at $1.47 billion, up from $1.45 billion a week earlier, while assets under management declined to $934 million from $995 million.

XRP still needs stronger institutional demand to offset the significant weakness in retail investor activity.

Data from CoinGlass showed that open interest in XRP perpetual futures remained relatively stable at $2.36 billion, compared with $2.69 billion on June 1.

Compared with the record high of $10.94 billion reached in July, current open-interest levels suggest that caution and risk aversion continue to dominate retail investor sentiment.

A return of retail participation remains a key requirement for XRP to resume a sustained bullish trend.

Oil prices moved higher on Monday after the United States and Iran reached an agreement to halt recent hostilities in the Middle East.

US West Texas Intermediate crude futures climbed 2.4% to $70.85 a barrel. WTI had closed below the $70 level on Friday for the first time since February 27, one day before the outbreak of the Iran-Israel war.

Meanwhile, Brent crude futures, the global benchmark, gained 1.7% to $73.20 a barrel.

The gains came after a series of clashes between the United States and Iran threatened to derail negotiations aimed at ending the conflict. US officials said both sides had agreed to cease hostilities and allow commercial vessels to move freely through the strategically important Strait of Hormuz.

“Technical talks covering all aspects of the memorandum of understanding are expected to continue,” a US official told CNBC on Sunday.

“For now, both sides will stop escalating, and ships can move freely,” the official added.

Fresh attacks raise concerns over energy supplies

The US military launched strikes on several Iranian targets after reports emerged that a commercial tanker in the Strait of Hormuz had been hit by a projectile on Saturday.

Neighboring Gulf states Bahrain and Kuwait also reported detecting incoming missiles and drones overnight.

The renewed violence prompted US President Donald Trump to issue a warning to Iran on Sunday.

“US aircraft have just struck Iranian missile and drone storage facilities and coastal radar sites because Iran once again violated the ceasefire agreement,” Trump wrote on Truth Social.

“There may come a point when we can no longer remain reasonable and will be forced to finish militarily the mission we began so successfully. If that happens, the Islamic Republic of Iran will cease to exist.”

US Central Command said early Sunday that its fighter jets had targeted 10 Iranian military sites in and around the Strait of Hormuz in response to a drone attack on the Panama-flagged tanker MT Keiko.

According to the military, the vessel was carrying more than two million barrels of crude oil while transiting the strait.

Analysts warn of excessive optimism

Energy strategists at ING warned that oil market participants may be underestimating the risks surrounding the pace of supply recovery from the Gulf region.

Warren Patterson and Ewa Manthey said in a research note published Monday that developments over the weekend reinforced the fact that significant risks remain in the oil market.

“Despite this, market participants appear to be looking through these events and focusing instead on what continued improvements in oil flows mean for the global supply-demand balance,” the analysts said.

“That optimism looks misplaced and leaves considerable upside risk if supply recovery proves slower than expected or if we see another meaningful escalation.”

They added that although oil remains technically in oversold territory, market momentum still appears tilted to the downside.