FX.co ★ Euro Weakens Further

The euro weakened to $1.14, its lowest level since June 2025, pressured by broad US dollar strength amid expectations that the Federal Reserve will raise interest rates later this year. At the same time, easing tensions in the Middle East and reports that the US and Iran are working toward a potential agreement pushed oil prices lower. Still, investors remain concerned about persistent inflationary pressures. In the Euro Area, the ECB raised interest rates by 25 basis points this month, in line with expectations. On Monday, ECB President Christine Lagarde said the central bank does not need to react more forcefully to developments related to the Middle East conflict, emphasizing that inflation is projected to return to target over the medium term. Even so, markets continue to price in at least one further 25 bps increase this year, which would lift the deposit rate to 2.5%.