The euro traded at $1.16, hovering near its weakest level since early April, as investors digested mixed economic data and closely watched US-Iran negotiations. In Germany, consumer sentiment unexpectedly improved heading into June, defying forecasts for a further decline, largely on the back of a rebound in income expectations. Business confidence also inched higher in May, rebounding from April’s six-year low, and a separate report confirmed that GDP grew 0.3% in Q1 2026.
However, Thursday’s PMI showed the euro area economy unexpectedly contracted in May at the fastest pace since late 2023, as war-related pressures drove a sharp rise in living costs. S&P Global cautioned that the data signal inflation could approach 4% in the coming months. Money markets are now pricing in at least two ECB interest rate hikes before year-end.
At the same time, investors turned more optimistic about progress in US-Iran peace talks after US Senator Marco Rubio cited “some good signs” in the negotiations, although Tehran’s expanding uranium stockpile and its strategic control over the Strait of Hormuz remain major sticking points.
