Currency markets traded in a mixed pattern on Friday as ongoing uncertainty surrounding the US-Iran conflict kept many investors on the sidelines. The US dollar weakened against major peers as risk appetite improved in global equity markets, while the euro and British pound extended their recent gains.
US Dollar Under Pressure as Risk Sentiment Improves
The US Dollar Index remained under pressure, hovering around 100.75, after posting modest losses on Thursday. With no high-impact US economic data on the calendar, the greenback struggled as a positive tone in equity markets reduced demand for safe-haven currencies. Wall Street's major indexes posted gains, though US stock index futures traded mixed early Friday.
Market participants largely avoided taking large positions amid the geopolitical uncertainty, limiting major moves across asset classes. The June labor market report from Canada is expected to be the day's only major economic release with the potential to drive market sentiment during the second half of the session.
Euro and Pound Extend Gains
The euro maintained its strength against the US dollar during early Friday trading. EUR/USD edged higher toward the 1.1450 level after data from Germany confirmed that the country's annual Consumer Price Index (CPI) increased 2.3% year-over-year in June, matching the preliminary estimate and providing little surprise for markets.
The British pound also continued its recent advance. GBP/USD extended its weekly gains and traded above the 1.3400 mark, reaching its highest level since the middle of June. For more on the pound's performance, see our analysis: Sterling Heads for Worst Month Since July 2025 as Rate Bets Fade and Starmer Exit Stirs Uncertainty.
Canadian Dollar Awaits Employment Data
The Canadian dollar strengthened against its US counterpart ahead of the country's June labor market report. USD/CAD remained under pressure during the European session, falling toward 1.4150. Market expectations point to Canada's unemployment rate holding steady at 6.6% in June. The employment report is expected to be closely watched as it could influence expectations for the Canadian economy and prompt fresh movement in the currency pair.
Strong Japanese Inflation Data Supports Yen
Earlier on Friday, data from Japan showed that the country's Producer Price Index (PPI) rose 7.1% year-over-year in June, accelerating from the 6.6% increase recorded in May and exceeding market expectations of 6.8%. Japan's Finance Minister, Satsuki Katayama, said the government will closely monitor economic indicators and financial market conditions. Following the stronger-than-expected inflation data, USD/JPY remained under bearish pressure, declining about 0.5% on the day to trade near 161.60.
Indian Rupee Strengthens Despite Oil Price Concerns
The Indian rupee extended Thursday's recovery against the US dollar during Friday's opening session. USD/INR fell further toward 95.22 as the US dollar weakened amid hopes that renewed conflict in the Middle East between the United States and Iran would not become prolonged. However, the rupee could still face pressure if elevated oil prices persist, as higher energy costs remain a potential headwind for the Indian currency. For more on how geopolitical risks are affecting commodities, see: Gold Dips 1.4% for Week as US-Iran Conflict Stirs Inflation, Rate Hike Bets and Silver Holds Near $58 as Hormuz Oil Risk and Fed Rate Uncertainty Weigh.
This article is for informational purposes only and does not constitute financial advice.
