The euro weakened in European trading on Monday against a basket of global currencies, extending its losses for a sixth consecutive session against the US dollar and hitting its lowest level in six weeks, as investors continued buying the US currency as a preferred safe-haven asset amid escalating geopolitical tensions in the Middle East, especially following Trumps latest warnings to Iran.

Oil prices continue to rise in global markets, increasing inflationary pressure on European Central Bank policymakers and strengthening expectations for a European interest rate hike in June.

Price Overview

Euro exchange rate today: The euro fell 0.15% against the dollar to $1.1608, the lowest level since April 8, from todays opening level of $1.1625, while recording an intraday high of $1.1626.

The euro ended Friday down 0.4% against the dollar, marking its fifth consecutive daily loss, following another sharp rise in US Treasury yields.

The euro lost 1.35% against the dollar last week, recording its first weekly decline in three weeks and its biggest weekly loss since March, due to fears of a renewed Iran conflict and rising global oil prices.

US Dollar

The dollar index rose 0.15% on Monday, extending gains for a sixth consecutive session and reaching its highest level in six weeks, reflecting continued broad strength in the US currency against a basket of global currencies.

The dollar received additional support from rising US Treasury yields, which climbed to their highest levels in a year, as investors bet that the Federal Reserve will raise interest rates at least once this year.

Data released last week in the United States showed consumer prices in April rose at the fastest pace in three years, while producer prices increased at the strongest pace in four years, highlighting renewed inflationary pressure on Federal Reserve policymakers.

According to the CME FedWatch tool, markets are currently pricing in a 45% probability of a Federal Reserve rate hike in December, compared with just over 16% at the beginning of May.

Investors also continue buying the US dollar as a safe haven, as renewed Middle East tensions pushed oil prices higher and weakened risk appetite amid ongoing bond market selling.

Opinions and Analysis

Analysts at Barclays said in a note: Risk and bond market conditions appear to be deteriorating, and the environment remains supportive for further dollar gains this week.

They added that indications the Strait of Hormuz could remain closed for a longer period are creating upward pressure, noting that the dollar tends to rise between 0.5% and 1% for every 10% increase in oil prices.

Christopher Wong, strategist at OCBC Bank, said: In the near term, the US dollar may remain better supported on dips if yields stay elevated and markets continue expecting a more hawkish reaction from the Federal Reserve.

Global oil prices

Global oil prices rose more than 2% on Monday, extending gains for a third consecutive session and reaching their highest levels in two weeks, amid fears of renewed military confrontation between the United States and Iran and the continued closure of the Strait of Hormuz to international oil tankers.

Latest developments in the Iran conflict

US President Donald Trump issued a stern warning to Iran, saying that time is running out very quickly to reach a peace agreement, or there will be nothing left.

Trump is preparing to hold a key meeting in the White House Situation Room with national security leaders to discuss plans for resuming military strikes against Iranian energy facilities and infrastructure.

Trump held a phone call lasting more than half an hour with Israeli Prime Minister Benjamin Netanyahu to discuss options for returning to full-scale military action.

The UAE announced it is investigating the source of the drone attack, while Saudi Arabia intercepted three drones in Iraqi airspace.

An Iranian official warned of surprise scenarios if the United States resumes military strikes against Tehran.

European interest rates

Amid rising global oil prices, money markets continue to price in more than a 50% probability that the European Central Bank will raise interest rates by 25 basis points in June.

Investors are awaiting further economic data from the eurozone on inflation, unemployment, and wages in order to reassess those expectations.