The euro climbed above $1.16, its strongest level since early June, as investors shifted into riskier assets following news of a preliminary agreement between the United States and Iran to end their three-month conflict. Officials from both countries confirmed on Sunday that they had settled on a framework to halt hostilities, lift the US blockade, and reopen the Strait of Hormuz.
A memorandum of understanding is scheduled to be signed in Switzerland this Friday. However, uncertainty persists as markets await more detailed terms and note that the future of Iran’s nuclear program has been left for subsequent negotiations. At the same time, Israel’s National Security Minister Itamar Ben-Gvir has stated that the agreement is not binding on Israel.
On the monetary policy front, the European Central Bank raised interest rates last week for the first time in three years, taking a preemptive step to contain inflation fueled by higher energy costs. Markets now expect another rate increase, likely in September.
