FX.co ★ Euro Holds at Mid-January Lows

The euro extended earlier losses to trade around $1.16, its weakest level since mid-January, as the US dollar strengthened on safe-haven demand amid a sharp escalation in the Middle East conflict, overshadowing stronger-than-expected Eurozone inflation data. US President Donald Trump said the military campaign against Iran could last four to five weeks, while stressing that US forces are prepared to prolong operations if necessary. At the same time, higher energy costs following the formal closure of the Strait of Hormuz and the continued suspension of Qatari LNG exports are expected to intensify inflationary pressures across Europe, potentially prompting the ECB to adopt a more hawkish monetary policy stance. Eurozone data for February showed annual inflation unexpectedly at 1.9% and core inflation at 2.4%, both above forecasts. Last week, ECB President Christine Lagarde noted that headline inflation is expected to approach the 2% target over the medium term, although tensions in the Middle East are clouding the outlook.