To update prices and add details

Singapore/London, June 11 (Reuters) - The euro held steady near recent lows on Thursday ahead of a European Central Bank meeting where it is expected to raise interest rates for the first time in nearly three years, while markets cautiously monitored developments in the Gulf.

The euro rose slightly to $1.1551, but it remains closer to its mid-March lows near $1.14 than to its mid-April post-war highs above $1.18.

Lee Hardman, senior currency analyst at Mitsubishi UFJ, said the reason the euro has fallen back to its lowest point in the trading range since the start of the Middle East conflict is due to traders' increased expectations that the Federal Reserve (the US central bank) will tighten monetary policy to keep pace with the European Central Bank's earlier shifts in expectations during the conflict.

Markets have long anticipated that the European Central Bank will raise interest rates on Thursday. Hardman said this means traders will primarily focus on updated monetary policy guidance at the meeting, "given that there is roughly a 50 percent probability of two consecutive rate hikes in June and July."

He added, "The euro may fall slightly if European Central Bank President Christine Lagarde does not signal the possibility of raising interest rates again next month. It will be difficult to make a radical change in interest rates amid expectations of three rate hikes this year."

The British pound and the Japanese yen rose slightly against the dollar on Thursday, but their movements were limited. The pound reached $1.3381 and the yen 160.5 against the dollar, levels that continue to worry traders who fear official intervention from Tokyo to support the currency.

The Bank of Japan meets next week and is expected to raise interest rates. Bank of Japan Governor Kazuo Ueda has been hospitalized for medical treatment and will not attend the monetary policy meeting scheduled for June 15-16.

Traders are also closely watching news from the Gulf, where the United States and Iran exchanged airstrikes on Thursday for the second day in a row, and U.S. President Donald Trump vowed to launch more strikes on Iran unless it agrees to a peace deal.

Data released the previous day showed that the US consumer price index rose 4.2 percent in the twelve months to May, the largest increase since April 2023. Economists still believe that there is no need to tighten monetary policy yet.

The so-called core consumer price index rose 0.2 percent in May after increasing 0.4 percent in April, boosting hopes that price pressures from the energy shock could be contained.

Traders expect interest rates to rise by 25 basis points in December, a sharp shift from expectations of two rate cuts this year before the outbreak of war with Iran at the end of February.