Euro Holds Near Seven-Week High

The euro traded just above $1.15, hovering near its highest level since June 16 as easing geopolitical tensions supported risk sentiment. The currency drew support after US President Donald Trump called off planned strikes on Iran, signaling that a diplomatic resolution to the conflict remained possible, although uncertainty persisted after Tehran denied any ongoing or planned negotiations. The common currency was also underpinned by stronger-than-expected eurozone economic data, reinforcing expectations that the European Central Bank could raise interest rates at its next meeting. The eurozone economy grew 0.4% in the second quarter, twice the pace forecast and the strongest expansion since early 2025. Meanwhile, annual inflation accelerated to 2.9% in July, with both core and services inflation also picking up.

The euro traded just above $1.15, hovering near its highest level since June 16, as improving risk sentiment followed a sharp decline in oil prices. Crude fell on hopes of a US-Iran agreement to reopen the Strait of Hormuz after President Donald Trump said fresh talks with Tehran would begin on Monday, easing fears of a broader Middle East conflict. The drop in oil prices led money markets to modestly scale back expectations for further European Central Bank tightening, although a rate hike by September remains largely priced in. At the same time, stronger-than-expected eurozone data continued to support the policy outlook. The bloc's economy expanded 0.4% in the second quarter, beating forecasts of 0.2% and marking its fastest growth since early 2025. Meanwhile, annual inflation accelerated to 2.9% in July, while core and services inflation also strengthened.

The euro traded around $1.145, ending the month little changed against the US dollar as stronger-than-expected eurozone data offset mounting geopolitical tensions. The eurozone economy grew 0.4% in the second quarter, beating forecasts of 0.2% and marking its strongest expansion since early 2025. Meanwhile, annual inflation accelerated to 2.9% in July, with core and services inflation also strengthening. The data reinforced expectations for further ECB tightening, with markets fully pricing in the deposit rate reaching 2.75% by early 2027, implying two additional rate hikes, the first potentially in September. In the US, the Federal Reserve kept interest rates unchanged, although three FOMC members dissented in favor of a rate hike. Markets now assign about a 65% probability of a September increase. Meanwhile, oil prices jumped more than 20% this month after renewed US-Iran strikes, fueling concerns over energy supplies and inflation.