The euro rose in the European market on Thursday against a basket of global currencies, maintaining its gains for the third consecutive day against the US dollar, trading near its highest levels in three weeks, benefiting from weaker demand for the US currency as the best alternative investment amid de-escalation between the United States and Iran and growing hopes of a near peace agreement in the Middle East.
Following the decline in global oil prices, pricing for the probability of a European interest rate hike in June declined, and in order to reprice those probabilities, traders are awaiting the release of more economic data in the eurozone.
Price Overview
The euro exchange rate today: The euro rose against the dollar by about 0.15% to $1.1763, from the opening level of $1.1748, and recorded a low of $1.1742.
The euro ended Wednesdays trading up by about 0.5% against the dollar, marking its second consecutive daily gain, and recorded its highest level in three weeks at $1.1797, amid growing hopes of reaching a peace agreement between the United States and Iran.
The US dollar
The dollar index fell on Thursday by about 0.15%, extending its losses for the second consecutive session and heading toward touching its lowest level in three months, reflecting the continued decline of the US currency against a basket of global currencies.
Risk sentiment improved in global markets, and demand for the US dollar as a safe haven declined, amid easing tensions between the United States and Iran in the Strait of Hormuz and growing hopes of a near peace agreement.
Iran announced on Wednesday that it is reviewing a US peace proposal, and sources indicated that it would formally end the war, but would leave major US demands unresolved, namely Irans suspension of its nuclear program and the reopening of the Strait of Hormuz.
Some media reports stated that the proposal under discussion includes imposing restrictions on Irans nuclear program in exchange for lifting the naval blockade and reopening the Strait of Hormuz, as part of de-escalation efforts between Washington and Tehran.
Iranian authorities are expected to deliver their response today, Thursday, to Pakistani mediators, while US President Donald Trump stated that there had been very good talks over the past 24 hours, signaling progress on the diplomatic track.
Opinions and analysis
Helima Croft, head of global commodity strategy at RBC Capital Markets, said: It remains unclear whether there has been any tangible progress toward reopening the Strait of Malacca, or whether we are stuck in a stalemate resembling a ceasefire without oil.
Croft added: There is no doubt that part of the market will view a one-page memorandum to resume negotiations over the next 30 days as significant progress. However, it is unlikely that the memorandum of understanding will translate into an immediate resumption of maritime shipping and a broad restart of production.
European interest rates
With global oil prices declining, money market pricing for the probability of the European Central Bank raising European interest rates by 25 basis points in June fell from 55% to 45%.
In order to reprice the above probabilities, investors are awaiting the release of more economic data in the eurozone on inflation, unemployment, and wage levels.