The euro traded around $1.14, remaining close to one-year lows as investors awaited Thursday's European Central Bank policy meeting while monitoring the latest developments in the Middle East. The ECB is widely expected to leave interest rates unchanged after raising them in June, adopting a cautious stance as policymakers assess incoming economic data and geopolitical risks.
Despite an expected pause this week, markets continue to price in around two additional rate hikes by the end of the year, with the next move potentially coming in September.
Persistent concerns that escalating tensions in the Middle East could disrupt global oil supplies have reinforced expectations that inflationary pressures in the euro area may remain elevated.
Brent crude climbed to its highest level in more than a month after President Donald Trump ruled out imminent talks with Iran, warned of further strikes, and pledged retaliation if Iran-backed Houthi rebels in Yemen disrupt shipping through the Red Sea.