The EUR/USD currency pair hovered above a 1-week low of 1.1484 on Monday ahead of the flash German CPI inflation data for March, while geopolitical risks continued to lend support to the safe-haven US Dollar.
The Middle East conflict has intensified after Iran-backed Houthi militants in Yemen targeted Israel over the weekend.
At the same time, media reports indicated that the US was preparing for weeks of ground operations in Iran, after additional troops were deployed in the region.
These developments weighed on risk appetite and helped keep demand for the USD elevated.
Rising energy prices have fueled inflation concerns and reinforced the case for tighter monetary policy. Traders are no longer expecting two rate cuts by the Federal Reserve this year.
According to the CME FedWatch tool, there is now about 24% chance of at least one rate hike. Such expectations provided an additional layer of support for the greenback.
Meanwhile, higher Oil prices continued to weigh on the Euro Area outlook.
Germany’s annual inflation rate probably picked up to 2.7% in March, according to market consensus, from 1.9% in February.
A pickup in inflation will likely add to expectations that the European Central Bank may face increased pressure to raise interest rates in April.
The EUR/USD currency pair was last down 0.14% on the day to trade at 1.1492.
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