The euro fell against a basket of global currencies in European trading on Wednesday, resuming losses against the US dollar after a brief pause and moving further away from a two-month high, as renewed correction and profit-taking coincided with stronger demand for the US currency amid growing uncertainty over negotiations surrounding the Strait of Hormuz and ahead of key US inflation data for July.

With global oil prices continuing to rise, inflationary pressures on European Central Bank policymakers are increasing, strengthening expectations for a European interest-rate hike in September.

The Price

The euro today: The euro fell 0.1% against the dollar to $1.1533, from today's opening level of $1.1541, while recording a high of $1.1545.

The euro ended Tuesday unchanged against the dollar after losing 0.25% on Monday amid correction and profit-taking from a two-month high of $1.1581.

US dollar

The US Dollar Index rose 0.1% on Wednesday, extending its gains for a third consecutive session and reflecting continued strength in the US currency against a basket of major and minor currencies.

The dollar continues to benefit from uncertainty surrounding negotiations between the United States and Iran over the Strait of Hormuz, amid reports of persistent disagreements over how international shipping should be regulated and the security guarantees governing the vital waterway.

Key US inflation data for July are due later today and are expected to provide crucial clues about the likelihood of the Federal Reserve raising interest rates this year.

Global oil prices

Oil prices rose more than 1% on Wednesday, extending gains for a third consecutive session and approaching their highest levels in two weeks, amid uncertainty over a potential Strait of Hormuz agreement between the United States and Iran and renewed concerns about the security of energy supplies from the Middle East.

Higher global oil prices are renewing concerns about accelerating inflation, potentially pushing major central banks toward raising interest rates in the near term.

Hormuz developments

Pakistan has indicated progress toward a US-Iran agreement, even as Washington and Tehran continue to demand compensation.

Iran has reiterated that the strait will remain closed unless the United States meets its conditions, signaling a tougher negotiating stance.

Pakistan's interior minister has arrived in Tehran for talks with senior Iranian officials over the Strait of Hormuz crisis.

Qatar's Foreign Ministry spokesperson said negotiations between Oman and Iran over the Strait of Hormuz have reached an advanced stage.

US forces opened fire on a Panama-flagged vessel that was attempting to breach the blockade imposed on Iranian ports.

European interest rates

Amid rising oil prices, money-market pricing for a 25-basis-point European Central Bank interest-rate hike in September has increased from 35% to 50%.

Investors are awaiting further eurozone data on inflation, unemployment and wages to reassess those expectations.

Euro outlook

We expect that if US inflation data come in hotter than market expectations, the probability of a Federal Reserve rate hike this year will increase, extending the US dollar's gains against a basket of global currencies, particularly the euro.