The euro fell in European trading on Thursday against a basket of global currencies, pulling back from a one-week high against the US dollar and heading toward its first loss in the past three days, as investors turned away from risk and focused on buying the US currency as a preferred safe-haven asset following US President Donald Trumps speech on developments in the Iran war.

With eurozone inflation exceeding the European Central Banks medium-term target due to rising energy prices, expectations for at least one interest rate hike this year have increased, as markets await further key economic data from Europe.

Price Overview

Euro exchange rate today: the euro fell about 0.5% against the dollar to $1.1532, down from the session opening level of $1.1588, after hitting a high of $1.1605.

The euro ended Wednesdays session up 0.3% against the dollar, marking its second consecutive daily gain and recording a one-week high of $1.1627, amid growing optimism that the Iran war may be nearing an end.

US dollar

The dollar index rose 0.5% on Thursday, resuming gains that had paused over the past two sessions, reflecting renewed strength in the US currency against a basket of global currencies.

Dollar buying as a preferred safe-haven asset resumed following US President Donald Trumps address to the nation regarding developments in the Iran war.

Trumps speech

Trump focused on several key points regarding the trajectory of the Iran war, most notably:

The objectives of the war with Iran are nearly complete, and Tehran no longer poses a real threat.

Energy and oil infrastructure could be targeted if negotiations are not satisfactory.

Major military operations will continue for only two to three more weeks.

The United States does not need Middle East oil, and US oil production will rise significantly soon.

The United States has abundant gas supplies.

The United States does not need the Strait of Hormuz, and the strait will reopen automatically once the conflict ends.

Countries affected by the closure of the Strait of Hormuz should act to protect their interests.

Opinions and analysis

Carol Kong, currency strategist at Commonwealth Bank of Australia, said Trumps remarks did not reassure markets, noting that markets are beginning to realize that the war is likely to escalate before it de-escalates.

Kong added that the US dollar is expected to rise further against all major currencies, especially as markets recognize that the global economy will experience a noticeable slowdown.

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.

Data released on Tuesday showed that eurozone inflation exceeded the European Central Banks target, reaching 2.5% in March as energy prices rose.

Following the data, money markets increased pricing for a 25-basis-point rate hike by the European Central Bank at the April meeting from 30% to 35%.

Sources told Reuters that the European Central Bank is likely to begin discussing interest rate hikes at this months meeting.

To reassess these expectations, investors are awaiting further economic data from the eurozone on inflation, unemployment, and wage levels.