The euro tried to build on gains above the $1.16 mark but continued to hover near a two-month low. The single currency drew some support from a broadly weaker US dollar and a slight improvement in overall risk sentiment. Meanwhile, oil prices stayed below $90 per barrel after the International Energy Agency proposed an unprecedented release of strategic oil reserves to help offset the sharp rise in energy costs since the start of the Iran conflict.
On the monetary policy front, expectations for the European Central Bank have turned more hawkish. Markets are now largely pricing in at least one 25-basis-point rate increase this year, and some traders are beginning to consider the prospect of two hikes. ECB President Christine Lagarde reiterated on Tuesday that the central bank stands ready to take whatever measures are needed to keep inflation in check, even in the face of the current surge in energy prices.
