The euro declined in European markets on Monday against a basket of global currencies, extending its losses for the third consecutive day against the U.S. dollar and moving further away from a two-month high amid ongoing correction and profit-taking.

This follows renewed buying of the U.S. dollar as a preferred alternative investment, amid escalating tensions between the United States and Iran over control of the Strait of Hormuz and Tehran's continued refusal to participate in a new round of negotiations scheduled for later today in Pakistan.

The current rise in global oil prices is increasing signs of growing inflationary pressures on policymakers at the European Central Bank (ECB), strengthening the probability of European interest rate hikes this year.

Price Overview

- Euro Exchange Rate Today: The euro fell against the dollar by 0.3% to ($1.1728), from today's opening price of ($1.1762), and recorded a high of ($1.1763).

- The euro ended Friday's trading down by 0.15% against the dollar, marking its second consecutive daily loss due to correction and profit-taking from a two-month high of $1.1849.

- Last week, the euro achieved a gain of 0.35% against the dollar, its third consecutive weekly gain, driven by the Iranian war truce and hopes of reaching a peace agreement.

The U.S. Dollar

The dollar index rose on Monday by 0.15%, extending its gains for the third consecutive session and reaching its highest level in nearly a week, reflecting the continued ascent of the American currency against a basket of global currencies.

This rise is fueled by renewed buying of the dollar as a top alternative investment, given the escalating tensions between the U.S. and Iran and the diminishing chances of a Middle East peace agreement.

Charu Chanana, head of investment strategy at Saxo, stated: The weekend escalation has revived the geopolitical risk premium just as markets began to price in peace gains.

Iranian War Updates

- The Iranian Navy announced the re-closing of the Strait of Hormuz as of Saturday afternoon until the U.S. blockade on Iranian ships is lifted.

- U.S. President Donald Trump stated that the U.S. Navy intercepted the Iranian-flagged cargo ship "Tosca" in the Gulf of Oman.

- Tehran labeled the ship's interception an "act of maritime piracy" and a flagrant violation of the ceasefire agreement, vowing to respond.

- While Islamabad prepares to host a second round of peace negotiations today, Iran refuses to participate so far.

- International and regional parties are pressuring Tehran to join negotiations before the two-week ceasefire expires tomorrow, Tuesday.

Global Oil Prices

Global oil prices rose on Monday by more than 5%, staging a strong recovery from a four-week low amid renewed fears of supply disruptions from the Arabian Gulf, particularly following the re-closing of the Strait of Hormuz.

Rising oil prices renew fears of accelerating inflation, which may prompt global central banks to raise interest rates in the near terma sharp pivot from pre-war expectations of cutting or holding rates steady.

European Interest Rates

- With the rebound in global oil prices, money market pricing of the probability of the ECB raising rates by 25 basis points in April rose from 15% to 20%.

- Investors await more eurozone economic data on inflation, unemployment, and wages to re-price these probabilities.

- ECB President Christine Lagarde stated the bank is prepared to raise rates even if the expected inflation spike is short-term.

- Sources told Reuters that the ECB is likely to begin discussing rate hikes during this month's meeting.