On Friday, the euro (EUR) made slight gains against the somewhat weaker US dollar (USD). The currency pair has climbed to the mid-1.1400 range but seems unlikely to break above the two-week trading ceiling of about 1.1475, suggesting the week might conclude with minimal change.
In Germany, the finalized harmonized consumer price index (HICP) for June indicated a decrease in inflation, aligning with earlier predictions. This development relieves some pressure on the European Central Bank (ECB) regarding any further interest rate hikes in their upcoming July meeting.
According to HICP, consumer inflation in Germany decreased to 2.4% year-on-year in June, down from 2.7% in May, and peaked at 2.9% in April. Monthly inflation also fell by 0.2%, consistent with preliminary estimates and following a 0.% drop in May. Still, these figures haven’t significantly influenced the euro’s value.
Rebound in oil prices weighs on euro
Tensions between the US and Iran have reignited, leading to a rebound in oil prices and a notable decline in traffic through the strategically important Strait of Hormuz, presenting challenges for the euro’s recent gains.
This week, the U.S. military conducted strikes against Iranian targets in response to an alleged attack by Tehran on a vessel crossing Hormuz, prompting Iranian forces to target U.S. military bases in the Gulf. However, markets interpreted these military actions more as bargaining strategies for future negotiations, which kept risk aversion relatively low and prevented the euro from declining further.
Meanwhile, in the United States, the minutes from the last Federal Reserve monetary policy meeting showed a strong commitment to achieving inflation targets. Still, board members appear divided about the direction of short-term interest rates, leaving investors uncertain about when the next rate hike will happen. In the aftermath of the minutes being released, the US dollar experienced a slight dip.
