Euro under pressure over Iran war concerns

The euro fell in European trading on Monday against a basket of global currencies, continuing its losses for the third consecutive day against the US dollar. This decline comes as investors focus on buying the US currency as a preferred safe-haven asset amid escalating fears of the Iran war intensifying, as they await the final deadline set by US President Donald Trump to reopen the Strait of Hormuz.

With eurozone inflation exceeding the European Central Bank's medium-term target due to high energy prices, the probability of at least one European interest rate hike this year has increased, pending the release of further crucial economic data in Europe.

Price Overview

Euro exchange rate today: the euro fell about 0.1% against the dollar to $1.1505 from the session opening level of $1.1514, after reaching a high of $1.1525.

The euro ended Friday’s session down more than 0.2% against the dollar, marking its second consecutive daily loss due to developments in the Iran war.

US dollar

The dollar index rose more than 0.1% on Monday, maintaining gains for the third consecutive session and reflecting the continued strength of the US currency against a basket of global currencies.

The rally is driven by investors focusing on the US dollar as a preferred safe-haven asset amid rising fears of the Iran war escalating, especially following the recent threats from US President Donald Trump.

Strong labor market data released in the United States on Friday reduced the likelihood of the Federal Reserve cutting interest rates in the near term, as markets await further crucial economic data on inflation and consumer spending levels.

Iran war updates

• Trump vows that Iran will face "hell" by Tuesday if the deadline to open the Strait of Hormuz is not met.

• Axios: Iranian mediators are making last-ditch efforts to reach a 45-day ceasefire.

• Axios: Sources report that the chances of reaching a partial agreement within the next 48 hours are slim.

European interest rates

ECB President Christine Lagarde said the bank is prepared to raise interest rates even if the expected rise in inflation is short-term.

Data released last week showed that eurozone inflation exceeded the European Central Bank's target, reaching 2.5% in March as energy prices rose.

Following this data, money market pricing for the probability of the European Central Bank raising interest rates by 25 basis points in April increased from 30% to 35%.

Sources told Reuters that the European Central Bank is likely to begin discussing interest rate hikes during this month's meeting.

To reassess these probabilities, investors are awaiting the release of more economic data from the eurozone regarding inflation, unemployment, and wages.