EUR/USD experiences an upward movement as the US Dollar shows signs of weakness, attributed to reports regarding a US-Iran peace agreement aimed at reopening the Strait of Hormuz. Trump announced that the agreement with the Islamic Republic of Iran is now finalised. Markets are currently factoring in an additional rate hike from the ECB, with September emerging as the most probable timeline, although July is still a viable option. EUR/USD experiences an uptick following slight declines observed the day before, currently trading near 1.1610 during the Asian trading session on Monday.
The pair appreciates as the US Dollar declines amid easing risk aversion following reports that the United States and Iran have reached an agreement on a peace deal to end the war and reopen the Strait of Hormuz. Pakistan Prime Minister Shehbaz Sharif has stated that the United States and Iran have reached an agreement to conclude their nearly four-month conflict, with both parties announcing the immediate and permanent cessation of military operations across all fronts, including in Lebanon. “The Deal with the Islamic Republic of Iran is now complete,” US President Donald Trump stated on Sunday in a social media post. “I hereby fully authorise the toll-free opening of the Strait of Hormuz and, simultaneously herewith, authorise the immediate removal of the United States Naval blockade.”
Iran’s National Security Council has confirmed a ceasefire agreement with the US, stating that discussions for a final deal will commence once the other party meets its obligations outlined in the memorandum of understanding. Iranian officials stated that the maritime blockade against Iran must cease without delay and in its entirety. Markets continue to evaluate the European Central Bank’s initial interest rate increase in three years, a proactive step aimed at mitigating a wider inflation surge fuelled by rising fuel prices. Money markets are currently pricing in another increase, with a September hike considered the most probable course of action, although a July adjustment is still a viable option.
Alongside the rate tightening, the ECB has revised its inflation outlook upward, indicating that price pressures may persist longer than previously expected. Specifically, the ECB has revised its headline inflation projections, now forecasting 3.0% for 2026 and 2.3% for 2027, an increase from previous estimates of 2.6% and 2.0%, respectively. Core inflation expectations have received an upward adjustment, as the central bank now projects a consistent 2.5% for both 2026 and 2027, an increase from earlier forecasts of 2.3% and 2.2%.