Euro recovers above $1.16 as dollar weakens on yen and oil
The euro edged back above $1.16, supported by broad-based dollar weakness after a sharp yen rally. Easing oil prices also offered relief, while traders fully priced a 25-basis-point ECB hike to 2.5% next week.
The euro edged back above $1.16, pausing its recent selloff as a sharp rally in the yen weighed on the US dollar and easing oil prices offered some relief.
The yen strengthened on growing expectations of a Bank of Japan rate hike and the possibility of official intervention, triggering broad-based dollar weakness.
Meanwhile, Brent crude retreated from six-week highs after US President Donald Trump said the renewed US military campaign in Iran would not last long.
The euro nevertheless remains near a two-week low amid concerns over energy-driven inflation, higher interest rates and fiscal sustainability in countries including France and the UK.
Money markets continue to fully price in a 25-basis-point ECB rate hike to 2.5% next week.
Markets are also pricing in an almost 100% probability of a 3% deposit rate by June 2027, implying two further rate increases by mid-2027.