Continued demand for the US dollar as the best alternative investment
High energy prices could hinder the filling of fuel tanks in Europe.
Markets are awaiting new clues about the path of European interest rates.
The euro fell in the European market on Tuesday against a basket of global currencies, deepening its losses for the second day in a row against the US dollar, recording its lowest level in six weeks, as the focus continued on buying the US currency as the best alternative investment, amid escalating global geopolitical tensions and worsening military confrontations between the United States and Israel on one side and Iran on the other.
The single currency is also under pressure from concerns related to rising global energy prices due to the fallout from the Iranian war, which could hinder the EU's ability to fill fuel tanks as stockpiles fall to record lows.
Traders are awaiting the release later today of key inflation data for the whole of Europe for February, which are expected to provide strong clues about the European Central Bank's interest rate path this year.
Price overview
Euro exchange rate today: The euro fell against the dollar by 0.2% to ($1.1662), its lowest level since January 20, from today's opening price of ($1.1687), and recorded a high of ($1.1707).
The euro ended Monday's trading down 1.1% against the dollar, its biggest daily loss since July 30, 2025, due to the fallout from the Iranian war.
The US dollar index rose 0.2% on Tuesday, extending its gains for the second consecutive session and reaching a one-and-a-half-month high of 98.77 points, reflecting the continued strong rise of the US currency against a basket of major and minor currencies.
This continued rise is driven by currency purchases as the best alternative investment, as the Iranian war enters its fourth day, amid escalating fears of a wider conflict in the Middle East, which is pushing energy prices up significantly and increasing negative pressures on the global economy.
Developments in the Iranian war
US President Donald Trump stated that the war could last for weeks, and that it is unclear who will take over in Iran after the death of Supreme Leader Ayatollah Ali Khamenei.
Israeli Prime Minister Benjamin Netanyahu sought to allay concerns about the timeline, telling Fox News that it would not be an endless war.
The Saudi Ministry of Defense, in a post on X.co.uk citing an initial assessment, reported that two drones targeted the US Embassy in Riyadh, resulting in a small fire and some damage.
European interest rate
The money market's pricing of the likelihood of the European Central Bank cutting European interest rates by about 25 basis points in March is stable around 25%.
Traders have revised their expectations from the European Central Bank keeping interest rates steady throughout this year to at least one cut of around 25 basis points.
Inflation in Europe: In order to reprice the prospects for a European interest rate cut this year, investors are awaiting the release later today of key European inflation data for February, which will show how much inflationary pressures have affected monetary policymakers at the European Central Bank.
The annual Consumer Price Index (CPI) for Europe will be released at 10:00 GMT, with market expectations pointing to a 1.7% increase in February, matching the previous reading, and a 2.2% increase in the core value, also matching the previous reading.
Predictions regarding the performance of the Euro: Here at FX News Today, we predict that if inflation data comes in less hot than currently expected in the markets, the chances of a European interest rate cut this year will increase, which means more negative pressure on the Euro exchange rate in the foreign exchange market.
