FX.co ★ Euro Slides Toward April Lows Amid Middle East Tensions

The euro fell toward $1.16, approaching its weakest level since April 7, as escalating tensions in the Middle East dampened hopes for a swift reopening of the Strait of Hormuz and heightened concerns over the Eurozone’s economic outlook. On Monday, Iran’s Tasnim News Agency reported that Tehran would suspend negotiations with the United States regarding Israeli strikes on Lebanon and move to fully close the Strait of Hormuz, accusing Washington of “violating the ceasefire on all fronts.” The resulting spike in oil prices led investors to increase expectations for further interest rate hikes by the European Central Bank. Markets now anticipate at least two ECB rate increases this year, assigning over a 90% probability to the first move occurring as early as next week. Investors are also awaiting this week’s Eurozone inflation data, after last week’s releases showed an acceleration in EU-harmonized inflation in May for France, Italy, and Spain, while Germany recorded a slowdown.