The euro rose in European trading on Monday against a basket of global currencies, as it attempts to recover after four consecutive days of losses against the US dollar, benefiting from a slowdown in the US currency, as investors assess developments in the Iran war and the likelihood of a new round of negotiations between the United States and Iran in Pakistan.

Following more hawkish comments from the President of the European Central Bank last week, expectations for at least one interest rate hike this year have increased. To reassess those expectations, markets are awaiting the release of key inflation data from Germany, the eurozones largest economy, later today.

Price Overview

Euro exchange rate today: the euro rose about 0.2% against the dollar to $1.1521, up from the session opening level of $1.1500, after hitting a low of $1.1487.

The euro ended Fridays session down 0.15% against the dollar, marking its fourth consecutive daily loss, amid continued escalation of military confrontations in the Middle East.

The euro declined 0.55% against the dollar last week, recording its third weekly loss over the past month, due to concerns over the repercussions of the Iran war and its negative impact on the European economy.

US dollar

The dollar index fell 0.2% on Monday, retreating from a two-week high of 100.34 points, reflecting a slowdown in the US currency against a basket of major and minor currencies.

Beyond profit-taking, the US dollar is weakening as investors assess developments in the Iran war and the strong likelihood of a new round of negotiations between the United States and Iran in Pakistan aimed at ending the ongoing conflict in the Middle East.

Federal Reserve Chair Jerome Powell is scheduled to speak later today, with his remarks expected to provide new clues about the path of US interest rates over the course of this year, especially after the recent rise in oil prices amid the impact of the Iran war.

European interest rates

ECB President Christine Lagarde said last week that the bank is ready to raise interest rates even if the expected rise in inflation is temporary.

Following those comments, money markets increased pricing for a 25-basis-point rate hike by the European Central Bank at the April meeting from 25% to 35%.

Sources told Reuters that the European Central Bank is likely to begin discussing interest rate hikes next month.

To reassess these expectations, investors are awaiting the release of Germanys March inflation data later today.

Euro outlook

We at Economies.com expect that if Germanys inflation data comes in more hawkish than market expectations, the likelihood of European interest rate hikes this year will increase, leading to further recovery in the euros exchange rate against a basket of global currencies.