The Euro topped $1.16, hitting a new 2021-high, benefiting from a general dollar weakness, as traders continue to assess the situation in the Middle East. President Trump announced a cease fire between Israel and Iran, easing concerns about potential supply disruptions in the energy sector, but the truce is being tested as Israel has already accused Iran of violating the agreement.
On the economic front, the Ifo business climate for Germany improved to the highest in nearly a year but flash PMIs painted a mixed picture, with private sector activity in the Euro Area showing signs of stabilization. Meanwhile on the monetary policy front, analysts continue to expect a 25bps rate cut by the ECB before the year end. President Lagarde said that “at the current interest-rate levels, we believe that we are in a good position to navigate the uncertain circumstances” while Governing Council member Villeroy de Galhau said that the ECB could still cut interest rates in the next half year.
