The euro declined in European trading on Tuesday against a basket of global currencies, extending its negative movement for a second consecutive session against the US dollar, as investors continued favoring the US currency as the top safe-haven asset amid fading hopes for a US-Iran agreement that could end military tensions in the Middle East.

With global oil prices continuing to rise, markets are increasingly pricing in the possibility of a European interest rate hike in June. Investors are now awaiting additional economic data from the eurozone to reassess those expectations.

Price Overview

EUR/USD today: The euro fell more than 0.2% against the US dollar to $1.1757, from todays opening level at $1.1783, while the session high was recorded at $1.1788.

The euro ended Monday down less than 0.1% against the dollar, due to renewed corrective selling and profit-taking after reaching a three-week high at $1.1797.

Beyond profit-taking activity, the euro weakened due to fears of renewed war between the United States and Iran.

US Dollar

The US Dollar Index rose 0.25% on Tuesday, extending gains for a second straight session, reflecting continued strength in the US currency against a basket of global currencies.

The rise comes as investors continue buying the US dollar as a safe haven amid growing concerns over renewed military confrontation between the United States and Iran, especially after Tehran rejected the American peace proposal.

US-Iran Negotiations

US President Donald Trump said on Monday that the ceasefire with Iran was close to collapse, after Tehrans response to a US proposal to end the war showed that both sides remain far apart on several key issues.

Trump also confirmed that he is seriously considering relaunching Project Freedom, while announcing plans for an upcoming meeting with a large group of generals and military commanders to discuss available options and strategies regarding the Iranian file.

Meanwhile, Iranian Parliament Speaker Mohammad Bagher Ghalibaf said there is no alternative to accepting Irans proposal, stressing that Tehran is prepared to respond immediately to any military action.

Global Oil Prices

Oil prices rose nearly 1% on Tuesday, maintaining gains for a second consecutive day amid fears that the Strait of Hormuz could remain closed and continue disrupting global oil supplies.

Higher global oil prices are undoubtedly reviving fears of accelerating inflation, which could push central banks worldwide toward raising interest rates in the near term, marking a sharp shift from pre-war expectations of prolonged rate cuts or policy stability.

European Interest Rates

As global oil prices continue rising, money markets raised pricing for a 25-basis-point European Central Bank rate hike in June from 45% to 50%.

Investors are now awaiting more eurozone data on inflation, unemployment, and wages in order to reassess those expectations.