The euro rose in European trading on Wednesday against a basket of global currencies, extending its gains for the second consecutive day against the US dollar and hitting its highest level in a week, benefiting from the continued decline in the US currency amid growing optimism over an end to the Iran war, especially following recent statements by Donald Trump.

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 rose about 0.25% against the dollar to $1.1579, the highest level in a week, up from the session opening level of $1.1553, after hitting a low of $1.1550.

The euro ended Tuesdays session up 0.8% against the dollar, marking its first gain in the past six days, as part of a recovery from a two-week low of $1.1443.

Aside from buying from lower levels, the euro gained after less aggressive remarks from the US administration regarding the course of the Iran war.

Over the course of March trading, the euro declined 1.75% against the US dollar, marking its second consecutive monthly loss, due to investors focusing on buying the US currency as a preferred safe-haven asset.

US dollar

The dollar index fell 0.2% on Wednesday, extending its losses for the second consecutive session and moving away from a ten-month high, reflecting the continued decline in the US currency against a basket of global currencies.

Aside from profit-taking activity, the US dollar weakened amid growing optimism over a potential end to the Iran war, particularly following recent remarks by US President Donald Trump.

Trump said on Tuesday that the United States could end its military campaign against Iran within two to three weeks. He added that Tehran is not required to reach an agreement as a precondition for ending the conflict.

US Secretary of State Marco Rubio told Fox News that the United States sees the finish line of the war with Iran.

The White House announced that US President Donald Trump will deliver an address to the nation to provide important updates on Iran at 09:00 PM Eastern Time on Wednesday (01:00 GMT Thursday).

Sho Suzuki, a market analyst at Matsui Securities, said that looking at the broader market, expectations for a ceasefire are increasing, so the reversal of the long-standing buy the dollar and sell other currencies strategy is likely to continue.

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 wages.