FX.co ★ Euro Gains Slightly Amid Middle East Developments

The euro edged up to $1.165, partially retracing its early-week losses, as the dollar weakened following reports that Iran had signaled willingness to discuss conditions for ending the war. The New York Times reported that, a day after US-Israeli strikes began, operatives from Iran’s Ministry of Intelligence made an indirect approach to the CIA. Israeli officials have urged Washington to disregard the overture for now, according to the same report.

Despite the modest rebound, the euro remains close to one-and-a-half-month lows, pressured by the ongoing conflict in the Middle East and mounting concerns over higher energy costs. February Eurozone data showed headline inflation at 1.9% year-on-year and core inflation at 2.4%, both above consensus forecasts. Money markets now imply roughly a 40% probability of an ECB rate hike by year-end, a sharp shift from last week, when traders viewed a rate cut as an equally plausible outcome.