The euro rose against a basket of global currencies in European trading on Thursday and is on track to post its first gain in four sessions against the US dollar, supported by improving risk sentiment as hopes grow for a peace agreement that could end the conflict in the Middle East, particularly following the announcement of a US-brokered ceasefire between Hezbollah and Israel.

Expectations for a European Central Bank rate hike later this month have also strengthened, especially after recent data from the eurozone showed inflation accelerated last month, driven by higher energy and services prices.

Price overview

The euro rose about 0.15% against the dollar to $1.1613, up from an opening level of $1.1597. The session low was $1.1595.

The euro ended Wednesday down 0.3% against the dollar, marking its third consecutive daily decline, amid military exchanges between the United States and Iran and Iranian attacks targeting Kuwait and Bahrain.

US dollar

The US Dollar Index fell around 0.15% on Thursday, pulling back from a two-month high of 99.55 and heading toward its first loss in four sessions, reflecting a decline in the US currency against a basket of global currencies.

In addition to profit-taking, the dollar weakened as risk appetite improved following news that US mediation had successfully secured a ceasefire agreement between Hezbollah and Israel.

Global oil prices

Global oil prices fell roughly 1.5% on Thursday, retreating from their highest levels in nearly two weeks and heading toward their first daily loss in four sessions.

The decline comes amid growing optimism that the United States and Iran could reach a broader peace agreement that would include reopening the Strait of Hormuz.

Iran war developments

The Trump administration announced late Wednesday that Israel and Lebanon had agreed to implement a ceasefire to end hostilities, boosting hopes for a wider agreement to bring the Iran-related conflict to an end.

Trump said Iran had agreed to abandon nuclear weapons, although he cautioned that its position could still change. He also stated that the Strait of Hormuz would reopen immediately once Iran signs the agreement memorandum.

The Republican-controlled US House of Representatives approved a resolution on Wednesday aimed at preventing President Donald Trump from continuing the war against Iran.

European interest rates

Data released this week showed that eurozone inflation accelerated last month, driven by rising energy and services prices linked to the impact of the Iran conflict.

Following those figures, money markets increased the probability of a 25-basis-point European Central Bank rate hike in June from 90% to 95%.

Reuters sources indicated that the ECB is highly likely to raise interest rates in June, given inflation expectations that are moving toward an undesirable scenario.