Euro Climbs to Near Seven-Week High on Easing Geopolitical Tensions

The euro strengthened toward $1.155, its highest level since June 16, as improving risk sentiment lifted demand for the single currency amid growing optimism that the US and Iran could reach a deal to end their five-month conflict and reopen the Strait of Hormuz. Crude oil prices have fallen about 10% this week after US President Donald Trump said the two countries were engaged in "very good discussions," raising hopes of a recovery in Middle Eastern energy supplies. Lower energy prices have eased concerns over inflation and weaker economic growth, reinforcing expectations that the European Central Bank will take a gradual approach to policy tightening. Markets now fully price in just one additional ECB rate hike by year-end, with around a 40% chance of a second. The ECB raised rates in June but left policy unchanged at its latest meeting.

The euro traded slightly above $1.15, hovering near its highest level since June 16 as easing geopolitical tensions improved risk sentiment. Oil prices tumbled on optimism that diplomatic efforts could end the US-Iran conflict, easing concerns over inflationary pressures. Qatar said mediators were making progress in negotiations, while US Treasury Secretary Scott Bessent said a deal to reopen the Strait of Hormuz could be reached as early as Tuesday or Wednesday. Meanwhile, stronger-than-expected eurozone data continued to support expectations that the European Central Bank could raise interest rates at its next meeting in September. The bloc's economy expanded 0.4% in the second quarter, twice the expected pace and the strongest growth since early 2025, while annual inflation accelerated to 2.9% in July, with both core and services inflation also strengthening.

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.