The euro rose against a basket of major currencies in European trading on Friday, extending its gains for a third consecutive session against the US dollar and heading for a second straight weekly advance, supported by easing military tensions between the United States and Iran in the Strait of Hormuz.

Following this week's surge in global oil prices, expectations have increased that the European Central Bank could deliver one additional 25-basis-point interest rate hike before the end of the year.

The Price

The euro rose around 0.3% against the US dollar to $1.1461, from Friday's opening level of $1.1430, after touching an intraday low of $1.1428.

The euro closed Thursday's session up more than 0.1% against the dollar, marking its second consecutive daily gain after the exchange of military strikes between the United States and Iran came to a halt.

Weekly performance

So far this week, which officially concludes with Friday's settlement, the single European currency has gained more than 0.25% against the US dollar and is on track to post its second consecutive weekly advance.

US dollar

The dollar index fell 0.3% on Friday, extending losses for a third straight session and reflecting continued weakness in the US currency against a basket of major and minor currencies.

The decline came as demand for the dollar as a safe-haven asset continued to ease after diplomatic efforts successfully contained the military escalation between the United States and Iran, with both sides adhering to the ceasefire agreement.

Latest developments in the Iran conflict

Military strikes between the United States and Iran have paused to allow regional mediation efforts to continue.

US President Donald Trump warned that any further attacks on commercial vessels in the Strait of Hormuz would trigger "much stronger" military strikes.

A US official revealed that "technical back-channel talks" between Washington and Tehran over the nuclear issue are still ongoing.

Traffic through the Strait of Hormuz slowed sharply, with only 13 oil tankers and commercial vessels transiting the waterway over the past 24 hours.

European interest rates

Money markets continue to price around a 10% probability of a 25-basis-point European Central Bank rate hike at the July meeting.

This week, the probability of a 25-basis-point ECB rate hike in December has climbed to above 90%.

Investors are awaiting additional eurozone data on inflation, unemployment, and wage growth to reassess those expectations.