Euro Climbs Ahead of Eurozone Inflation, GDP Data
The euro (EURUSD) climbed to $1.17 on Monday as the US dollar rally slowed amid a new proposal from Iran that could end the Middle East war, while markets awaited economic data releases.
EUR demand increased, setting the stage for the single currency’s recovery from two-week lows as investors await a busy week of economic releases, including Eurozone inflation and GDP data, and global interest rate decisions.
The single currency gained traction as Iran submitted a new proposal to the US aimed at reopening the Strait of Hormuz following US President Donald Trump’s announcement over the weekend that he cancelled a planned trip by US envoys to Pakistan for talks with Iran.
In a note, Marc Chandler, Chief Market Strategist at Bannockburn Capital Markets, said the euro benefited from the market’s stronger appetite for risk and the broad dollar pullback more than a particular European development.
At its peak in March, the swaps market discounted three rate hikes fully by the European Central Bank (ECB) this year and about 25% chance of a fourth.
It now has two hikes discounted and less than a 10% chance of a third. This still seems excessive. At its most extreme last month, the swaps market had 85% chance of an April hike. It has been scaled back to about 12%.
Eurozone inflation is expected to hit 2.9% in April, the highest since December 2023, fueled by surging energy prices tied to the Middle East conflict.
The market anticipates that the European Central Bank is likely to keep rates unchanged at its Thursday meeting, adopting a wait-and-see approach amid evolving macroeconomic and geopolitical conditions. FX analysts expect two quarter-point rate hikes in 2026, with a potential third by year-end.
