The euro retreated to $1.17, pulling back from near three-week highs, as investors assessed the impact of stalled US–Iran talks and growing expectations of further ECB rate hikes. Concerns over a fragile ceasefire and stubborn inflation have led markets to price in three additional ECB rate increases by year-end, with more than an 85% probability assigned to the first move in June.
ECB President Christine Lagarde reiterated on Friday that the central bank stands ready to act swiftly if needed, stressing that the euro area’s economic position is now stronger than it was before Russia’s invasion of Ukraine.
At the same time, German wholesale prices rose 6.3% year-on-year in April, the fastest pace since February 2023, against a backdrop of ongoing tensions in the Middle East. Eurostat data also confirmed that the Eurozone economy expanded by just 0.1% in Q1 2026, its weakest quarterly growth since Q2 2025.
