FX.co ★ Euro Flat Amid US-Iran Standoff and Trade Hopes

The euro held at $1.17, trading just below last week’s three-week high, as investors weighed the impact of stalled US-Iran negotiations on monetary policy against renewed optimism following the US-China summit. Hopes for a durable US-Iran peace agreement have largely faded, effectively keeping the Strait of Hormuz closed and intensifying inflationary pressures. Money markets now reflect nearly a 90% probability of a rate hike in June, with almost three increases fully priced in by the end of 2026. Reinforcing this outlook, ECB policymaker Martins Kazaks said on Thursday that the central bank will need to raise borrowing costs if higher crude prices begin to push up inflation expectations. At the same time, investors are closely watching developments in Beijing, where hopes persist that the US-China summit could boost global trade relations. President Trump is expected to ask Chinese President Xi Jinping to help bring an end to the Iran conflict, despite earlier comments suggesting he did not require such assistance.