The euro was steady at $1.16 as investors weighed conflicting developments in the Middle East and looked ahead to next week’s European Central Bank meeting. Iran said it had targeted a US command vessel in the Gulf of Oman, while the Republican-controlled House voted to block US military action against Iran, in a rare rebuke to President Donald Trump. Meanwhile, Israel and Lebanon agreed to a conditional ceasefire, though Prime Minister Benjamin Netanyahu warned that further strikes remained possible.
On the monetary policy front, markets are now all but certain the ECB will deliver a 25-basis-point rate hike at its June 11 meeting, with expectations for a total of two or potentially three increases over the course of the year. The shift follows data showing Euro-area inflation accelerated to 3.2% in May, the highest level in more than two and a half years, propelled by surging energy prices linked to the war. Core inflation also rose more than anticipated, reaching 2.5%, while services inflation increased to 3.5%, signaling that price pressures are spreading beyond energy.
