The euro rose in the European market on Wednesday against a basket of global currencies, extending its gains for the second consecutive day against the US dollar, due to slower purchases of the US currency as a safe haven and improving risk sentiment, amid growing hopes of reaching a peace agreement between the United States and Iran.

Amid elevated pricing of the probability of European interest rate hikes this year, traders are awaiting the release of more economic data in the eurozone in order to reassess the chances of the European Central Bank normalizing monetary policy in June.

Price Overview

The euro exchange rate today: The euro rose against the dollar by about 0.4% to $1.1736, from the opening level of $1.1692, and recorded a low of $1.1689.

The euro ended Tuesdays trading up by less than 0.1% against the dollar, marking its first gain in the past three days, as military tensions between the United States and Iran in the Strait of Hormuz eased.

The US dollar

The dollar index fell on Wednesday by 0.5%, heading toward its first loss in the past four sessions, reflecting the decline of the US currency against a basket of major and secondary currencies.

Risk sentiment improved in global markets, with slower purchases of the US dollar as the best alternative investment, due to growing hopes of reaching a peace agreement between the United States and Iran.

In a notable development, US President Donald Trump announced that the United States and Iran had reached an agreement to suspend the movement of Project Freedom ships through the Strait of Hormuz, as long as the blockade remains fully in place, indicating that this decision comes amid significant progress toward reaching a comprehensive agreement between the two sides.

Trump explained that the suspension came in response to a request from Pakistan and several other countries, confirming that it is a temporary measure aimed at allowing time to complete negotiations and sign the anticipated agreement.

In the same context, US Secretary of State Marco Rubio stated that the Salty Rage operation had ended and that the priority is now focused on reopening the Strait of Hormuz.

Global oil prices

Global oil prices fell on Wednesday by more than 2.5%, extending losses for the second consecutive day and moving away from their highest levels in several weeks, amid easing fears over disruptions to energy supplies from the Arabian Gulf region and growing chances of reopening the Strait of Hormuz to oil tankers.

There is no doubt that declining global oil prices reduce concerns about accelerating inflation, which supports global central banks maintaining monetary policy tools unchanged for a long period this year.

European interest rates

With the decline in global oil prices, 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.