Euro Steady Near Two-Week Low Ahead of Key Data

The euro hovered around $1.17, close to last week’s two-week lows, as investors grappled with the fallout from stalled US-Iran negotiations and braced for a wave of pivotal economic data. This week’s releases include Eurozone inflation and GDP figures, alongside key global interest rate decisions. Market caution intensified after the European Central Bank reported a sharp rise in inflation expectations for March, compounded by reports that US President Donald Trump rejected Iran’s proposal to postpone nuclear negotiations until the conflict and shipping disputes are resolved. On the monetary policy front, the ECB is expected to hold rates steady at its Thursday meeting, adopting a cautious stance amid the Middle East crisis. However, further tightening remains on the table, with markets anticipating at least two quarter-point rate hikes in 2026.

The euro strengthened above $1.17, recovering from two-week lows recorded last week, as investors await a busy week of economic releases, including Eurozone inflation and GDP data, and global interest rate decisions. 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. At the same time, 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. Markets still anticipate two quarter-point rate hikes in 2026, with a potential third by year-end. Meanwhile, reports indicate that Iran has 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 canceled a planned trip by US envoys to Pakistan for talks with Iran.

The euro climbed back above $1.17, attempting to rebound from two-week lows, as renewed optimism surrounded potential progress in US-Iran peace negotiations. Iranian Foreign Minister Abbas Araghchi is expected to arrive in Islamabad tonight, according to Al-Jazeera, which cited Pakistani government sources suggesting a "high likelihood of a breakthrough" in the talks between the US and Iran. Investors are also focusing on the upcoming April European Central Bank policy meeting, where policymakers are widely expected to maintain interest rates. The ECB is taking a wait-and-see stance to evaluate the impact of recent macroeconomic data and geopolitical developments, particularly the Middle East conflict, against its earlier forecasts. Despite this cautious approach, money markets are fully pricing in two quarter-point rate hikes for 2026, with a chance of a third increase by the end of the year.