The euro weakened in European trading on Wednesday against a basket of global currencies, resuming its losses against the US dollar and moving further away from two-week highs. The single currency remains under pressure due to risk aversion as investors assess developments in negotiations between Washington and Tehran, following confirmation from both sides that diplomatic contacts continue and discussions over the final terms of a potential agreement are ongoing.

Inflation accelerated across the Eurozone last month, driven by rising energy and services prices, reinforcing expectations that the European Central Bank will raise interest rates later this month.

The Price

Euro exchange rate today: The euro declined 0.1% against the dollar to $1.1620, from an opening level of $1.1632, after reaching an intraday high of $1.1633.

The euro ended Tuesday little changed against the dollar after losing 0.2% in the previous session as part of a corrective pullback and profit-taking activity from a two-week high of $1.1686.

US dollar

The US Dollar Index rose about 0.1% on Wednesday, extending gains for a third consecutive session and reflecting continued strength in the US currency against a basket of global currencies.

The advance comes amid persistent caution in financial markets, with investors reducing risk exposure while awaiting further developments in talks between the United States and Iran aimed at ending the conflict and reopening the Strait of Hormuz.

US-Iran talks

US President Donald Trump stated that he believes a framework agreement with Iran to extend the ceasefire could be reached within the coming week.

Iran confirmed that it is still reviewing the final draft proposal and has not yet submitted its official response to the United States.

US Secretary of State Marco Rubio announced that Iran has agreed to discuss aspects of its nuclear program that it had previously refused to negotiate.

The United States continues to insist that sanctions relief will not be granted solely in exchange for reopening the Strait of Hormuz, and that any agreement must also address key issues such as Irans nuclear program.

European interest rates

Data released on Tuesday showed that inflation accelerated across the Eurozone last month, driven by higher energy and services costs linked to the fallout from the conflict involving Iran.

Following the data, money markets increased the probability of a 25-basis-point ECB rate hike in June from 90% to 95%.

Sources told Reuters that the European Central Bank is highly likely to raise interest rates in June, given inflation expectations that are moving toward an increasingly undesirable scenario.