FX.co ★ Euro Steady as AfD Victory and ECB Hike in Focus

The euro held just above $1.16, showing little movement as investors absorbed the far-right AfD’s election victory in Saxony-Anhalt and turned their attention to this week’s European Central Bank policy meeting, amid rising oil prices and mounting inflation concerns. The AfD secured 44% of the vote, falling short of an outright majority but dealing a significant setback to Chancellor Friedrich Merz’s conservative bloc. At the same time, Brent crude climbed toward seven-week highs after the US struck three Iranian oil tankers over the weekend, destroying one, while Tehran threatened to establish a new restricted zone outside the Strait of Hormuz. Against this backdrop, the ECB is expected to raise interest rates on Thursday, opting for caution as the US-Iran conflict persists, keeping oil prices elevated and reigniting inflationary pressures. Markets are also pricing in roughly a 90% chance of a second rate increase by year-end.