The euro strengthened toward $1.155, its highest level since June 16, as improving risk sentiment lifted demand for the single currency amid growing optimism that the US and Iran could reach a deal to end their five-month conflict and reopen the Strait of Hormuz. Crude oil prices have fallen about 10% this week after US President Donald Trump said the two countries were engaged in "very good discussions," raising hopes of a recovery in Middle Eastern energy supplies. Lower energy prices have eased concerns over inflation and weaker economic growth, reinforcing expectations that the European Central Bank will take a gradual approach to policy tightening. Markets now fully price in just one additional ECB rate hike by year-end, with around a 40% chance of a second. The ECB raised rates in June but left policy unchanged at its latest meeting.