The euro hovered around $1.138, near a two-month low, as the US dollar stayed firm amid waning optimism over US-Iran negotiations and rising expectations of additional Federal Reserve rate hikes this year. Iran said it would not soften its conditions for reopening the Strait of Hormuz after President Trump rejected its proposal. In an interview with Axios, Trump said Iran had “overplayed its hand” and that he expected talks to resume this week.
On the monetary policy front, hawkish comments from Federal Reserve officials, together with data signaling solid economic growth and a resilient labor market, have strengthened expectations of further tightening in US monetary policy. In Europe, the US-Iran standoff and recent energy price developments have continued to stoke concerns about renewed inflationary pressures. Money markets are now pricing in roughly 100 basis points of interest rate increases by the end of 2027.
