The euro climbed above $1.17 in early May, rebounding from three-week lows as investors digested the European Central Bank’s latest policy decision and a renewed rise in oil prices amid escalating tensions in the Middle East. The ECB left interest rates unchanged but kept its options open for June and beyond, highlighting increased inflation risks alongside concerns about economic growth. At the subsequent press conference, ECB President Christine Lagarde said the decision to hold rates was unanimous, although the possibility of a hike had been discussed.
In parallel, ECB policymaker Joachim Nagel warned that the central bank might need to tighten policy as early as June, pointing to a deteriorating inflation outlook and the danger of entrenched price pressures. Fellow official Madis Müller also indicated that interest rates may still need to rise. Markets now anticipate three rate hikes in 2026, with the first fully priced in by July. Further supporting the euro, Brent crude prices advanced after US President Donald Trump decided to maintain the naval blockade of Iranian ports.
