The euro dipped to around 1.1460 against the dollar in early Asian trading on Monday, as renewed geopolitical risks and expectations of higher US interest rates bolstered the greenback. The decline came after US President Donald Trump threatened to resume military action against Iran, even as Vice President JD Vance held initial talks with Iranian officials under an interim peace deal. The developments pushed investors toward safe-haven assets, supporting the US dollar.
Geopolitical tensions weigh on euro
CNBC reported Sunday that Trump warned Iran to stop its proxies in Lebanon from causing trouble, threatening to "hit Iran very hard again" if they did not. The remarks overshadowed the first US-Iran talks under the interim agreement and followed Tehran's announcement that it had again closed the Strait of Hormuz. Risk-off sentiment returned to markets, lifting the dollar against the euro.
ECB rate path in focus
European Central Bank policymaker Pierre Wunsch said Friday that the ECB could raise interest rates again as soon as next month if inflation in the eurozone shows signs of spreading beyond energy. The deposit rate currently stands at 2.25%, and markets have priced in additional 25-basis-point hikes in September or October, possibly followed by another early next year. ECB President Christine Lagarde is scheduled to speak later Monday, and traders will watch for any further signals on the rate outlook.