Euro extends recovery on Middle East peace optimism

The euro rose in European trading on Thursday against a basket of global currencies, extending its recovery for a second straight session from a six-week low against the US dollar, supported by continued bargain buying and easing demand for the US currency as a safe haven amid optimism over a potential peace agreement between the United States and Iran.

Investors are now awaiting a series of economic releases later today covering the main sectors of the European economy for May, as markets continue to reprice rising expectations that the European Central Bank could raise interest rates at its June meeting.

Price Overview

• Euro exchange rate today: The euro rose by around 0.1% against the US dollar to $1.1635, from the session opening level at $1.1624, after touching an intraday low of $1.1616.

• The euro ended Wednesday’s session up around 0.2% against the dollar after earlier falling to a six-week low of $1.1583.

• In addition to bargain buying at lower levels, the euro gained alongside improving risk appetite in global markets following positive remarks regarding US-Iran negotiations.

US dollar

The US Dollar Index fell by around 0.1% on Thursday, extending losses for a second consecutive session and moving further away from one-and-a-half-month highs, reflecting continued weakness in the US currency against a basket of major and minor currencies.

Beyond profit-taking activity, the dollar weakened as hopes increased that Washington is nearing an agreement with Tehran to end the war in the Middle East.

Iran war developments

• Trump: The United States is in the final stages of negotiations with Iran.

• Trump said he is willing to wait a few more days for the “right answer” regarding a peace agreement with Iran.

• Iran’s Foreign Ministry officially announced that it is currently reviewing the latest responses and proposals received from Washington through the Pakistani mediator.

• Sources: A new round of peace talks between the United States and Iran will be held in Islamabad after the Hajj season.

• Pakistan’s army chief may visit Iran on Thursday to announce the final wording of the agreement.

European interest rates

• Sources: The European Central Bank is highly likely to raise interest rates in June due to inflation expectations moving toward an undesirable scenario.

• Money markets are currently pricing in more than a 70% probability of a 25 basis point ECB rate hike at the June meeting.

• Investors are awaiting a series of economic reports later today on the key sectors of the European economy during May in order to reassess those expectations.