The euro edged lower in European trading on Friday against a basket of global currencies, extending its losses against the US dollar for a second consecutive session as correction and profit-taking continued from a seven-week high. The decline coincided with increased demand for the US currency amid growing uncertainty surrounding negotiations between the United States and Iran over reopening the Strait of Hormuz.

With global oil prices rising again, inflationary pressures facing European Central Bank policymakers are increasing, strengthening expectations for a European interest rate hike in September.

The Price

The euro today: The euro fell around 0.1% against the dollar to $1.1518, from today's opening level of $1.1524, after recording a high of $1.1525.

The euro ended Thursday down 0.25% against the dollar, marking its first loss in three sessions, after earlier reaching a seven-week high of $1.1560.

US dollar

The US Dollar Index rose by less than 0.1% on Friday, holding gains for a second consecutive session and reflecting continued strength in the US currency against a basket of global currencies.

Demand for the US dollar as a safe haven is increasing as uncertainty persists over negotiations between the United States and Iran concerning the Strait of Hormuz, amid reports of continuing disagreements over how international shipping should be regulated and what security guarantees should apply to the vital waterway.

The US jobs report for July is due later today and will provide crucial evidence on the likelihood of the Federal Reserve raising interest rates this year.

Global oil prices

Oil prices rose by around 0.5% on Friday, extending their recovery for a second consecutive session from three-month lows, supported by bargain buying and renewed concerns over the security of global energy supplies from the Middle East.

Hormuz negotiations

Diplomatic sources said Iran and Oman are close to announcing a temporary agreement regulating and reopening inbound and outbound shipping routes through the Strait of Hormuz.

Tehran is demanding an end to the US naval blockade of its ports, the removal of recent oil sanctions, and the release of frozen Iranian assets as conditions for reopening the strait.

Iran's parliament has begun reviewing legislation that would prohibit vessels from certain countries, including the United States and Israel, from passing through the strait, while imposing fees and penalties on some ships using the waterway.

The White House rejects granting Iran the authority to impose mandatory transit fees on commercial vessels or establish a new security framework that could affect international freedom of navigation.

Oman continues efforts to bridge differences between Washington and Tehran, with reports indicating that proposals have been exchanged regarding the regulation of international shipping.

President Donald Trump said he believes the war will end very soon, describing the negotiations as a final opportunity for diplomacy.

Iran's chief negotiator accused Trump of "show diplomacy" as traffic through the Strait of Hormuz remains almost completely halted.

The Houthis announced new attacks, renewing concerns that further escalation could complicate negotiations and increase security risks across the region.

European interest rates

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

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

Euro outlook

We expect that stronger-than-expected US employment data would increase expectations for higher US interest rates this year, potentially deepening the euro's current losses against the US dollar.