FX.co ★ Euro Rebounds as Dollar Weakens on Soft US Inflation

The euro strengthened to $1.145, its highest level since June 19, driven by broad-based dollar weakness after softer-than-expected US inflation data reduced pressure on the Federal Reserve to raise interest rates this year. Investors also reacted to escalating tensions in the Middle East and rising oil prices, which stoked concerns about the inflation outlook, monetary policy, and economic growth. The US military continued strikes against Iran after President Donald Trump reinstated a blockade on Iranian shipping and proposed a 20% fee for safeguarding transit through the Strait of Hormuz, intensifying uncertainty over global energy supplies. In response, markets increased their expectations for further European Central Bank tightening, with money markets now projecting a deposit rate of 2.70% by December (up from 2.25%) and fully pricing in a rate hike in September.