Dutch International: US and Iran tensions push up ECB interest rate hike expectations, but euro upside is limited

On July 10, ING analyst Francesco Pesole said that the recent military strike between the United States and Iran has raised market expectations for the European Central Bank to raise interest rates again, but there is limited room for benefit for the euro. He pointed out that the renewed escalation of the conflict has pushed the euro/dollar short-term swap spread to tighten again. "While all this has injected new confidence into the previously fading ECB interest rate hike expectations in September, the path for the euro to strengthen against the dollar from this renewed upgrade is quite narrow." He said the euro/U.S. dollar may stabilize on Friday as the market waits for clarity, but there is a risk of falling back below 1.14. (Jin Shi)