The euro traded near $1.145, its weakest level since mid-March, and was heading for a weekly loss of about 1% amid broad-based dollar strength. Risk sentiment deteriorated after planned US-Iran peace talks in Switzerland were abruptly canceled, rekindling doubts about the durability of the tentative deal reached over the weekend to end the Middle East conflict.
The US dollar also drew support from the Federal Reserve, which left interest rates unchanged but signaled a more hawkish stance in its latest projections. In Europe, focus remained on the European Central Bank, which recently raised interest rates for the first time since 2023. Money markets are now pricing in at least one more ECB hike this year, as policymakers continue to emphasize their commitment to tackling inflation.
ECB Governing Council member Pierre Wunsch indicated that another rate increase could come as early as next month if inflationary pressures spread beyond the energy sector. Meanwhile, Chief Economist Philip Lane suggested that the euro-area economy may be resilient enough to handle higher borrowing costs without losing momentum.
