Euro Hits 5-week Low

The euro fell below $1.165, hitting its lowest level since early April and tracking toward a weekly loss of over 1% against the US dollar. Mounting evidence of economic damage from the Iran war has led investors to expect faster-than-anticipated interest rate hikes and weaker growth. Oil prices surged after US President Donald Trump’s remark that “we don’t need the Strait of Hormuz open,” heightening concerns that higher energy costs will drive up prices across goods and services, further fueling inflation. Investors have increased bets on European Central Bank rate hikes, now fully pricing in three increases. ECB official Martins Kazaks reinforced this view on Thursday, stating that the central bank would need to raise borrowing costs if rising crude prices feed into inflation expectations.

EURUSD decreased to 1.17, the lowest since April 2026. Over the past 4 weeks, Euro US Dollar lost 1.04%, and in the last 12 months, it increased 4.4%.

The euro held at $1.17, remaining below the three-week highs seen last week, as investors assessed the impact of stalled US-Iran negotiations on monetary policy alongside optimism from the US-China summit. Expectations for a lasting US-Iran peace deal have faded, keeping the Strait of Hormuz effectively closed and amplifying inflationary pressures. Money markets now price in a nearly 90% chance of a June rate hike, with three increases almost fully priced in by the end of 2026. ECB official Martins Kazaks reinforced this outlook on Thursday, stating that the central bank will need to raise borrowing costs if rising crude prices feed into inflation expectations. Meanwhile, investors are monitoring Beijing, where optimism about the US-China summit’s potential to improve global trade relations remains. President Trump is expected to ask Chinese President Xi Jinping to help end the Iran war, despite earlier remarks that he did not need assistance.