The euro hovered around $1.165 as investors weighed mixed signals from Eurozone inflation data and the Middle East conflict. Headline inflation in the bloc rose to 3.2% in May, the highest level in more than two and a half years, largely driven by surging energy costs linked to the war. At the same time, core inflation climbed more than expected to 2.5%, and services inflation accelerated to 3.5%, indicating that price pressures are broadening beyond energy.
The figures come ahead of next week’s European Central Bank meeting, with markets assigning about a 95% probability to a 25-basis-point rate increase and anticipating two, possibly three, hikes over the course of the year. Still, ECB Executive Board member Isabel Schnabel warned on Monday that it is too early to determine how many rate increases will ultimately be required, while Lithuania’s central bank governor Gediminas Šimkus said another hike after June is likely.
In commodity markets, oil prices declined amid conflicting messages from US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu regarding talks on Lebanon, as Iran put negotiations with the United States on hold until hostilities subside.
