Euro Gains Ground Amid US-Iran Deal Optimism

2026-05-06 11:17 By Joana Ferreira 1 min. read

The euro extended its gain toward $1.18, reaching its strongest level since April 20, as the US dollar’s safe-haven appeal faded amid growing optimism over a potential US-Iran agreement.

According to Axios, the White House is close to a one-page Memorandum of Understanding with Iran to end the conflict and begin nuclear negotiations, the closest the parties have been to a deal since the conflict started.

Tehran is expected to respond within 48 hours, though no agreement is finalized.

Money markets have scaled back bets on European Central Bank rate hikes, now expecting the deposit facility rate to reach around 2.6% by December, reflecting two fully priced hikes, with a 75% chance of a first increase in June.

On Wednesday, ECB board member Piero Cipollone said the likelihood of a rate hike had risen due to persistent inflation pressures, echoing similar remarks from other policymakers earlier this month.



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Euro Gains Ground Amid US-Iran Deal Optimism
The euro extended its gain toward $1.18, reaching its strongest level since April 20, as the US dollar’s safe-haven appeal faded amid growing optimism over a potential US-Iran agreement. According to Axios, the White House is close to a one-page Memorandum of Understanding with Iran to end the conflict and begin nuclear negotiations, the closest the parties have been to a deal since the conflict started. Tehran is expected to respond within 48 hours, though no agreement is finalized. Money markets have scaled back bets on European Central Bank rate hikes, now expecting the deposit facility rate to reach around 2.6% by December, reflecting two fully priced hikes, with a 75% chance of a first increase in June. On Wednesday, ECB board member Piero Cipollone said the likelihood of a rate hike had risen due to persistent inflation pressures, echoing similar remarks from other policymakers earlier this month.
2026-05-06
Euro Gains as US-Iran Deal Hopes Rise
The euro strengthened above $1.17, trading at its highest level since April 21, as the safe-haven appeal of the U.S. dollar weakened amid growing optimism over a potential US-Iran agreement. US President Donald Trump paused "Project Freedom," the operation guiding ships through the Strait of Hormuz, citing "great progress" in talks with Iran. Yet, he stressed that the US blockade of ships to and from Iranian ports would "remain in full force and effect," keeping uncertainty alive over the Strait’s future. Money markets now expect the ECB’s deposit facility rate to reach around 2.6% by December, reflecting two fully priced hikes and a possible third, with a 75% probability of a first rate increase in June.
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Euro Little-Changed as Geopolitics and ECB Hike Bets Weigh
The euro traded near $1.17, as investors weighed Middle East tensions, new US tariffs, and rising expectations of an ECB rate hike as soon as June. Oil prices stayed close to four-year highs due to the US-Iran standoff over the Strait of Hormuz. Meanwhile, Trump ordered the withdrawal of 5,000 US troops from Germany, hinting at further cuts, and raised tariffs on EU cars and trucks to 25%, accusing the EU of failing to uphold its trade deal with Washington. Markets now price in over three ECB hikes this year. Though the ECB held rates steady last week, it signaled potential adjustments, citing inflation risks and growth concerns. Officials Joachim Nagel, Madis Müller, and Peter Kazimir hinted at tightening in June, warning of persistent price pressures.
2026-05-05