The euro declined in the European market on Wednesday against a basket of global currencies, resuming its losses that had paused against the US dollar, moving away from its highest levels in two months, due to renewed correction and profit-taking, coinciding with increased demand for the US currency, as a result of escalating uncertainty regarding the ongoing negotiations on the Strait of Hormuz, and ahead of the release of key US inflation data for July.
As global oil prices continue to rise again, inflationary pressures are mounting on monetary policymakers at the European Central Bank, increasing the likelihood of a European interest rate hike in September.
Price overview
Euro exchange rate today: The euro fell against the dollar by 0.1% to $1.1533, compared to today's opening price of $1.1541, and recorded a high of $1.1545.
The euro ended Tuesday's trading session unchanged against the dollar, after losing 0.25% on Monday due to profit-taking and corrective moves from a two-month high of $1.1581.
US dollar
The dollar index rose 0.1% on Wednesday, extending its gains for a third consecutive session, reflecting the continued rise of the US currency against a basket of major and minor currencies.
The US dollar is rising amid continued uncertainty surrounding negotiations between the United States and Iran over the Strait of Hormuz, with reports indicating ongoing disagreements over the mechanism for regulating international navigation and security guarantees in the vital waterway.
Key US inflation data for July will be released later today, which will 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, holding onto gains for a third straight session and nearing their highest levels in two weeks, amid uncertainty over the Strait of Hormuz agreement between the United States and Iran, and renewed concerns about the safety of supplies from the Middle East region.
Undoubtedly, rising global oil prices are renewing fears of accelerating inflation, which could prompt global central banks to raise interest rates in the near term.
Hormuz Updates
Pakistan indicates progress in the agreement between the United States and Iran, amid demands from Washington and Tehran regarding compensation.
Iran insists that the strait will remain closed unless the United States meets its demands, a stance that reflects a hardening of its position in the negotiations.
The Pakistani Interior Minister arrived in Tehran for talks with top Iranian authorities about the Strait of Hormuz crisis.
The Qatari Foreign Ministry spokesman said that negotiations between Oman and Iran regarding the Strait of Hormuz have entered advanced stages.
US forces fired on a Panamanian-flagged ship that was attempting to breach the blockade imposed on Iranian ports.
European interest rate
Amid rising oil prices, the money market's pricing in the likelihood of the European Central Bank raising interest rates by 25 basis points in September has increased, settling from 35% to 50%.
In order to reprice those probabilities, investors are awaiting further economic data from the Eurozone on inflation, unemployment and wage levels.
Euro performance forecast
Here at FX News Today, we expect that if US inflation data comes in hotter than the markets anticipate, the chances of the Federal Reserve raising interest rates this year will increase, which will broaden the gains of the US dollar against a basket of global currencies, most notably the euro.
