FX.co ★ Euro Edges Up as ECB Rate Hike Looms

The euro edged up to $1.154, attempting a rebound from more than two-month lows, as easing Israel-Iran tensions briefly tempered concerns that weekend attacks might derail US-led Middle East peace efforts. Market focus is now on Thursday’s European Central Bank policy meeting, where a 25-basis-point rate hike—its first move in a year—is widely expected, following the conflict’s impact on energy prices and inflation. Investors will also scrutinize President Lagarde’s press conference for signals on the future policy path. The anticipated hike comes after euro-area inflation climbed to its highest level in more than two and a half years. Money markets are currently pricing in roughly 70 basis points of additional tightening by year-end, implying one more quarter-point increase and a better than 70% probability of a third.