Key Moments
- EUR/USD trades near 1.1610 during Asian hours after a prior session of slight losses.
- Reports of a US-Iran peace deal and reopening of the Strait of Hormuz weigh on the US Dollar.
- Markets continue to price in another ECB rate hike, with September seen as the most likely timing and July still on the table.
Euro Firms as Risk Sentiment Improves
EUR/USD moves higher as the US Dollar (USD) loses ground following reports that the United States (US) and Iran have reached a peace deal that would end hostilities and reopen the Strait of Hormuz.
The pair advances after posting modest declines in the previous session, trading around 1.1610 during Asian trading on Monday. The easing of risk aversion in response to the reported agreement is supporting the Euro against the Dollar.
Details of Reported US-Iran Agreement
Bloomberg reported on Sunday that Pakistan Prime Minister Shehbaz Sharif said the US and Iran have agreed on a deal to end their nearly four-month war, with both parties declaring the immediate and permanent halt of military operations across all fronts, including Lebanon.
“The Deal with the Islamic Republic of Iran is now complete,” US President Donald Trump said on Sunday in a social media post. “I hereby fully authorize the toll-free opening of the Strait of Hormuz and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade.”
Iran’s National Security Council confirmed a ceasefire arrangement with the US, stating that final deal negotiations will begin once the other party fulfills commitments outlined in the memorandum of understanding. Iranian officials said the maritime blockade on Iran should be lifted at once and in full.
ECB Outlook and Inflation Projections
Market participants are still digesting the European Central Bank’s (ECB) first interest rate increase in three years, which was introduced as a preemptive effort to contain broader inflation pressures fueled by surging fuel prices. Money markets are already discounting the likelihood of another rate move, with September seen as the most probable timing, while July remains a viable alternative.
In conjunction with the rate hike, the ECB raised its inflation forecasts, signaling that price pressures could persist for longer than previously anticipated.
| Previous projection | New projection | |
|---|---|---|
| Headline inflation 2026 | 2.6% | 3.0% |
| Headline inflation 2027 | 2.0% | 2.3% |
| Core inflation 2026 | 2.3% | 2.5% |
| Core inflation 2027 | 2.2% | 2.5% |
The upward revisions for both headline and core inflation in 2026 and 2027 underpin expectations that the ECB may maintain a tightening bias.
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