The euro weakened against a basket of major global currencies in European trading on Tuesday, pulling back from a two-week high against the US dollar as traders engaged in profit-taking and corrective selling, while the US currency recovered ahead of the Federal Reserve's policy meeting.

With the European Central Bank maintaining a data-dependent approach and avoiding any commitment to a specific policy path, investors are awaiting additional economic data from the eurozone to reassess expectations for future interest rate moves.

Price action

The euro fell more than 0.1% against the dollar to $1.1576, down from an opening level of $1.1590, after reaching an intraday high of $1.1595.

The single currency closed Monday up 0.2% against the dollar and touched a two-week high of $1.1622 after the United States and Iran reached an agreement to end the conflict in the Middle East.

US dollar

The US Dollar Index rose 0.1% on Tuesday, rebounding from a two-week low as the greenback recovered against a basket of major and minor currencies.

In addition to bargain buying, the dollar's recovery comes as markets seek greater clarity on the preliminary peace agreement between the United States and Iran.

The Federal Reserve begins its latest monetary policy meeting later today, with the policy decision due on Wednesday. Markets broadly expect interest rates to remain unchanged for a fourth consecutive meeting.

Oil prices

Global oil prices fell more than 0.5% on Tuesday, extending losses for a fourth straight session and remaining near three-month lows as concerns over Middle East supply disruptions continued to ease following the reopening of the Strait of Hormuz.

US-Iran agreement

The United States and Iran have electronically signed a preliminary peace agreement, though full details remain unclear.

Reports indicate the agreement includes a 60-day extension of the ceasefire and intensive negotiations over Iran's nuclear program.

President Donald Trump announced the lifting of the US naval blockade on Iranian ports and the full reopening of the Strait of Hormuz to international shipping without transit fees.

Mediators have scheduled Friday, June 19, 2026, for the formal signing ceremony between US and Iranian delegations in Switzerland.

Media reports suggest the agreement falls short of Israel's wartime objectives.

Prime Minister Benjamin Netanyahu and President Donald Trump appear headed toward a policy clash following the US-Iran agreement, particularly regarding potential restrictions on Israeli operations in southern Lebanon.

Iranian Foreign Minister Abbas Araghchi has called on Israel to halt military operations in Lebanon.

European interest rate outlook

Reports suggest the European Central Bank is considering pausing policy normalization in July if energy prices remain near current levels.

Following the decline in oil prices, money markets have reduced the probability of a 25-basis-point ECB rate hike in July from 50% to 30%.

Expectations for a 25-basis-point rate increase in September have also fallen from 70% to 50%.

Investors are now awaiting additional eurozone inflation, labor market, and wage data to reassess the outlook for European interest rates.