Middle East Conflict Weakens Euro, Boosts US Dollar

The Guardian reported that the Israeli military launched a fresh wave of strikes on Tehran, following US President Donald Trump's signal of a pause in US attacks against energy infrastructure after what he said were productive talks with Iran. Iranian officials, including Foreign Minister Abbas Araghchi and Parliament Speaker Mohammad Bagher Ghalibaf, stated there was "no dialogue" or "no negotiations" with Washington, while senior military adviser Mohsen Rezaei said the war will continue until Iran receives full compensation.

San Francisco Federal Reserve Bank President Mary Daly, as reported by Reuters, indicated uncertainty regarding future interest rate moves unless the Iran conflict resolves quickly and temporary oil price increases can be "looked through." Rising oil prices are fueling inflation concerns, strengthening the European Central Bank's (ECB) hawkish stance, which left rates unchanged last week, citing the Iran conflict as a source of "significantly more uncertain" outlook. Markets now boost expectations of potential ECB rate hikes later this year, and any hawkish signals from policymakers scheduled to speak on Monday will provide support to the Euro.