Heading into the European trading session on 18 May, the US dollar (USD) continued to strengthen, reaching 99.25 — its highest level since 8 April — amid rising geopolitical tensions and shifting expectations surrounding US monetary policy.

The greenback gained momentum due to heightened risk aversion and renewed speculation that the US Federal Reserve may keep interest rates higher for longer.

According to the CME FedWatch tool, markets are now pricing in a nearly 44.6-percent probability that the US central bank could raise interest rates by at least 25 basis points during its December meeting.

The shift in expectations came as investors reassessed inflation risks and closely monitored geopolitical developments involving the United States and Iran.

Among the latest developments was a warning from US President Donald Trump to Iran that the “clock is ticking,” as efforts to negotiate an end to the conflict remained stalled.

Analysts said further escalation of the conflict could unsettle major global currencies and increase demand for safe-haven assets such as the US dollar.

Data released earlier Monday by China’s National Bureau of Statistics of China showed that retail sales rose by just 0.2 percent year-on-year in April, significantly lower than the 1.7 percent growth recorded in the previous period.

The figure also fell short of market expectations of 2.0 percent.

The weaker-than-expected data from China further dampened market sentiment and reinforced concerns over slowing global economic growth.

Meanwhile, the EUR/USD pair recovered some lost ground from a six-week low to trade near 1.1630 during the European morning session.

GBP/USD remained on the defensive around 1.3315, while USD/JPY edged higher to near 158.50.

Gold prices also recovered to near $4,550, snapping a four-day losing streak.