Euro Weakens Near US$1.17 Amid US-Iran Tensions
The euro weakened near US$1.17 on Tuesday (May 12), reversing from a near three-week high. This movement occurred as investors assessed the impact of escalating US-Iran tensions on risk sentiment, amid market expectations that the ECB still has room to raise interest rates further.
Geopolitical pressure returned to energy prices after Brent rose above US$105 per barrel, following US President Donald Trump's rejection of Iran's latest peace proposal as "unacceptable." The rise in oil reinforced market concerns over the risk of energy inflation, which in turn could impact Europe's monetary policy path.
In the interest rate market, money markets are now pricing in three ECB rate hikes this year, with a greater than 86% probability of the first hike in June. This pricing keeps investors focused on the balance between slowing growth and price pressures, particularly if energy becomes a persistent source of inflation again.
Comments from ECB officials also serve as market reference. ECB President Christine Lagarde reiterated on Friday that the central bank is ready to act swiftly if needed, stating that the eurozone economy is now in a stronger position than before Russia's invasion of Ukraine. Going forward, the market will monitor the direction of oil prices and geopolitical developments, as well as ECB signals regarding the intensity and tempo of policy tightening. (asd)
Source: Newsmaker.id
