The euro fell in the European market on Tuesday against a basket of global currencies, extending its losses for the third consecutive day against the US dollar, as investors continued to focus on buying the US currency as a safe haven amid escalating tensions between the United States and Iran in the Strait of Hormuz.
With the likelihood of a European interest rate hike in June already high, markets are awaiting a key speech later today from European Central Bank President Christine Lagarde, which may include further clues about the path of monetary policy in the Eurozone this year.
Price overview
Euro exchange rate today: The euro fell against the dollar by 0.1% to $1.1677, from today's opening price of $1.1687, and recorded a high of $1.1694.
The euro ended Monday's trading down about 0.3% against the dollar, its second consecutive daily loss, due to escalating military tensions between the United States and Iran in the Strait of Hormuz.
The dollar index rose 0.1% on Tuesday, extending its gains for a third straight session, reflecting the continued strength of the U.S. currency against a basket of major and minor currencies.
This rise comes as investors continue to flock to the US dollar as a safe haven, amid escalating tensions between the United States and Iran over control of the Strait of Hormuz, which increases the likelihood of renewed military confrontations and reinforces uncertainty in global markets.
Hormuz tensions
Tensions have escalated between the United States and Iran over control of the waters of the Arabian Gulf, with the US military announcing it destroyed six Iranian small boats and intercepted cruise missiles and drones, while the Iranian side confirmed targeting a US frigate with missiles in the Strait of Hormuz.
US President Donald Trump issued a strongly worded warning to Iran in case naval vessels come under fire while protecting navigation, while Iran confirmed that it would not allow US ships to pass through the Strait of Hormuz.
As of Monday, Trump had launched a naval operation aimed at breaking the Iranian blockade of the strait and escorting stranded ships out.
European interest rate
The money market pricing of the probability of the European Central Bank raising interest rates by about 25 basis points next June has settled at around 55%.
In order to reprice these probabilities, investors are awaiting the release of more economic data in the Eurozone, particularly data on inflation, unemployment and wages.
By 12:30 GMT, European Central Bank President Christine Lagarde is scheduled to deliver an important speech at the opening of a conference in Frankfurt, which may include further clues about inflation developments in the Eurozone and interest rate expectations for the coming period.
