The euro slipped toward multi-week lows around $1.17 on Monday, pressured by a stronger dollar as investors sought safe-haven assets following a sharp escalation in the Middle East conflict. Over the weekend, the US and Israel launched strikes on Iran, resulting in the death of Iran’s Supreme Leader and effectively shutting the Strait of Hormuz.
The common currency also came under strain from surging energy prices, as Europe moves to secure substantial natural gas supplies just as market prices spike. At the same time, Friday’s data showed that inflation in Germany undershot expectations in February, while price growth accelerated in France and Spain.
Money markets are currently pricing in only about a 30% chance of an ECB rate cut by December. On Thursday, ECB President Christine Lagarde said headline inflation is expected to converge toward the 2% target over the medium term, while food inflation—key to consumer sentiment—is projected to remain slightly above 2% later this year.
