Euro advances as US-Iran peace deal weighs on US Dollar
EUR/USD rises after registering minor losses in the previous day, trading around 1.1610 during the Asian hours on Monday. The pair appreciates as the US Dollar (USD) declines amid easing risk aversion following the reports that the United States (US) and Iran agree on a peace deal to end the war and reopen the Strait of Hormuz.
Bloomberg reported on Sunday that Pakistan Prime Minister Shehbaz Sharif said that the United States (US) and Iran have agreed on a deal to bring their nearly four-month war to an end, with both sides declaring the immediate and permanent termination of military operations on all fronts, including in Lebanon.
“The Deal with the Islamic Republic of Iran is now complete,” US President Donald Trump said on Sunday in a social media post. “I hereby fully authorize the toll-free opening of the Strait of Hormuz and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade.”
Iran's National Security Council confirmed a ceasefire agreement with the US, adding that final deal talks will start after the other party fulfills commitments under the memorandum of understanding. Iranian officials said the maritime blockade against Iran should end immediately and entirely.
Markets are still processing the European Central Bank’s (ECB) first interest rate hike in three years, a preemptive move designed to curb a broader inflation surge driven by spiking fuel costs. Money markets are already factoring in another increase, with a September hike viewed as the most likely path, though July remains a distinct possibility. Alongside the rate tightening, the ECB upwardly revised its inflation outlook, signaling that price pressures may stick around longer than previously anticipated.
Specifically, the ECB boosted its headline inflation projections to 3.0% for 2026 and 2.3% for 2027, up from earlier estimates of 2.6% and 2.0%, respectively. Core inflation expectations were also given a lift, with the central bank now forecasting a steady 2.5% for both 2026 and 2027, up from the previous predictions of 2.3% and 2.2%.
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