The euro traded just below $1.18 on Tuesday, retreating from last week’s three-week high, as investors shifted their attention to escalating tensions in the Middle East and the European Central Bank’s cautious stance. US President Donald Trump confirmed that the two-week ceasefire between Washington and Tehran will expire on Wednesday evening, while US Vice President JD Vance and an Iranian delegation are due to arrive in Pakistan later today for peace talks.
In the run-up to the ECB’s monetary policy decision—where no changes to interest rates are expected—President Christine Lagarde cautioned that the Eurozone’s economic outlook “remains deeply uncertain.” She noted that the conflict in the Middle East, including the blockade of the Strait of Hormuz, has undermined Europe’s energy security, describing the resulting supply shock as “enormous.” Although energy prices have not yet triggered the ECB’s worst-case scenario, Lagarde emphasized that the outlook remains fragile.
