The euro declined in the European market on Monday against a basket of global currencies, moving away from its three-week highs against the US dollar as investors focused on buying the US currency as the best alternative investment amid stalled negotiations between the United States and Iran and the possibility of renewed military confrontations in the Middle East.

After global oil prices rose, pricing for the probability of a European interest rate hike in June also increased. To reprice those expectations, traders are awaiting the release of more economic data from the eurozone.

Price Overview

Euro exchange rate today: The euro fell against the dollar by 0.35% to $1.1745, from Fridays closing level of $1.1784, and recorded a session high of $1.1772.

The euro ended Fridays trading up by 0.5% against the dollar, resuming gains that had paused the previous day amid correction and profit-taking operations from the three-week high of $1.1797.

The euro also posted a weekly gain of 0.55% against the dollar last week, marking its second consecutive weekly gain, supported by hopes of reaching a lasting peace agreement between the United States and Iran.

The US dollar

The dollar index rose on Monday by about 0.3%, resuming gains that had paused on Friday and reflecting stronger levels of the US currency against a basket of global currencies.

This rise comes amid safe-haven buying of the US currency due to fears of renewed military confrontations between the United States and Iran, especially after Tehran rejected the US peace proposal.

Opinions and analysis

Chris Weston, head of research at Pepperstone Group in Melbourne, said: We begin trading in the new week, as has recently become the norm, influenced by geopolitical events.

Strategists at Barclays Bank said: The dollar remained under pressure last week as markets focused heavily on the prospects of a gradual reopening of the Strait of Hormuz.

US-Iran negotiations stall

On the Truth Social platform, US President Donald Trump announced his complete rejection of the Iranian response delivered through the Pakistani mediator, saying: I just read the response from the so-called representatives of Iran I do not like it totally unacceptable.

The Iranian proposal included ending the war on all fronts, including Lebanon, lifting the US naval blockade on Iranian ports, allowing Iranian administration of the Strait of Hormuz, and obtaining war reparations in exchange for later negotiations regarding the nuclear file.

Iranian President Masoud Pezeshkian struck a defiant tone, stressing that his country will not bow its head to the enemy, and that entering negotiations does not mean surrendering to Trumps greed.

Israeli Prime Minister Benjamin Netanyahu said in a television interview that the war is still ongoing because there is more work to do to finish it.

Global oil prices

Global oil prices jumped by more than 5% on Monday at the start of weekly trading, heading toward their highest levels in several weeks amid fears that the Strait of Hormuz will remain closed and oil supplies disrupted.

There is no doubt that rising global oil prices are reviving concerns about accelerating inflation, which could push global central banks toward raising interest rates in the near term, marking a sharp shift from pre-war expectations of interest rate cuts or prolonged stability.

European interest rates

With global oil prices rising, money market pricing for the probability of the European Central Bank raising European interest rates by 25 basis points in June increased from 45% to 50%.

In order to reprice the above probabilities, investors are awaiting the release of more economic data from the eurozone regarding inflation, unemployment, and wage levels.