The euro rose in European trading on Friday against a basket of global currencies, maintaining gains for a second consecutive day against the US dollar and heading toward a weekly advance after the European Central Bank raised interest rates for the first time in nearly three years in an effort to combat inflationary pressures stemming from the Iran conflict.

US President Donald Trump canceled planned military strikes against Iran and signaled that a peace agreement with Tehran could be close, helping to improve risk sentiment across global markets.

The Price

Euro exchange rate today: The euro rose around 0.1% against the dollar to $1.1587, up from an opening level of $1.1579, after touching an intraday low of $1.1557.

The euro ended Thursday up 0.4% against the US dollar following the ECB's policy decisions and Trump's announcement suspending US military strikes against Iran.

Weekly performance

For the week, which officially concludes with Friday's settlement, the single European currency is up about 0.6% against the US dollar and is on track to record its second weekly gain in the past three weeks.

European Central Bank

As widely expected, the European Central Bank raised interest rates by 25 basis points on Thursday, taking its benchmark rate to 2.40%. The move marked the first eurozone rate increase since September 2023 and was aimed at addressing inflationary pressures linked to the Iran conflict.

The ECB acknowledged that the effects of the Iran war and the energy crisis have intensified inflationary pressures across the eurozone and revised its inflation forecasts higher for both 2026 and 2027.

The central bank also stressed that future policy decisions will depend entirely on incoming economic data, geopolitical developments, and its assessment of underlying inflation trends.

ECB President Christine Lagarde said higher energy prices could push inflation above the bank's 2% target in the coming period. She also noted that the conflict in the Middle East has begun to weigh on economic activity across the eurozone.

European interest rates

Reports indicate that the European Central Bank is considering pausing monetary policy normalization in July if energy prices remain at current levels.

Money markets are currently pricing a roughly 50% probability of another 25-basis-point ECB rate hike in July.

Market pricing for a 25-basis-point rate increase in September remains above 70%.

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

Developments in the Iran conflict

President Donald Trump unexpectedly announced a halt to planned military airstrikes against targets inside Iran, saying a preliminary agreement had been approved by senior leaders in Tehran.

Trump stated that the final points of the peace agreement had been approved in principle by all parties involved.

Countries participating in the framework reportedly include the United States, Israel, Saudi Arabia, the United Arab Emirates, Qatar, Turkey, Pakistan, Bahrain, Kuwait, Jordan, and Egypt.

Reports indicated that discussions regarding Iran had been elevated to the highest levels of Iranian leadership and had received preliminary approval.

The naval blockade will remain in place until the agreement is finalized, with the time and location of the signing ceremony to be announced later.

Iran said no final decision has been made regarding the agreement that Trump hopes to sign soon, as the relevant authorities continue reviewing its details.

Trump maintained that the war with Iran has ended and said the agreement could be signed in Europe over the weekend in the presence of the Vice President.