FX.co ★ Euro Falls to Over One-Month Low

The euro slipped below $1.165, its weakest level since early April, and was on track for a weekly loss of more than 1% against the US dollar. Growing evidence of economic fallout from the Iran conflict has led investors to anticipate earlier-than-expected interest rate increases alongside slower growth. Oil prices jumped after US President Donald Trump remarked that “we don’t need the Strait of Hormuz open,” amplifying concerns that higher energy costs will push up prices across a broad range of goods and services, intensifying inflationary pressures. In response, investors have increased their wagers on European Central Bank tightening, with markets now fully pricing in three rate hikes. ECB policymaker Martins Kazaks underscored this outlook on Thursday, saying the central bank would need to lift borrowing costs if rising crude prices begin to feed into inflation expectations.