The US dollar held steady near the 101.40 mark on Friday, as investors weighed the implications of fresh US tariffs on more than 50 trading partners and simmering geopolitical risks in the Middle East. The greenback had briefly climbed above 101.50 late Thursday, reaching a three-week high, before settling into a narrow trading range.
Oil Prices Pull Back After Sharp Rally
Crude oil prices edged lower early Friday, correcting after a sharp 6% surge in the previous session. West Texas Intermediate crude traded just below $90 per barrel, as market participants reassessed supply risks and broader demand signals. The pullback follows a volatile week for energy markets, with Brent crude also experiencing significant weekly gains, underscoring persistent supply concerns.
New US Tariffs Add to Uncertainty
Late Thursday, the United States announced a new wave of tariffs targeting more than 50 trading partners. According to a US official, the measures are designed to address forced labor in the production of goods, rather than simply reinstating previous tariffs that were struck down by the Supreme Court in February. The announcement has injected fresh uncertainty into global trade dynamics, with investors now assessing the potential economic fallout.
The tariff news comes at a time when markets are already grappling with elevated geopolitical risks, particularly in the Middle East. The combination of trade policy shifts and regional instability has kept risk sentiment in check, with safe-haven assets like gold and the dollar drawing support. Gold surged to a two-week high above $4,100 earlier this week as investors sought refuge from the uncertainty.
ECB Holds Rates Steady, Euro Weakens
The European Central Bank left its key interest rates unchanged following its July policy meeting, as widely expected. ECB President Christine Lagarde refrained from signaling a potential rate hike in September, noting that the bank still has important economic data to assess. The euro weakened against the dollar, with EUR/USD falling about 0.3% on Thursday and consolidating below 1.1400 on Friday, trading near 1.1377. The ECB's decision comes amid a challenging inflation outlook, as detailed in our coverage of the ECB's rate hold at 2.25%.
Yen Under Pressure, Intervention Warning Issued
USD/JPY rose nearly 0.5% on Thursday, reaching a fresh four-decade high. The pair traded near 163.80 during the European session on Friday, as investors monitored official statements from Japanese authorities. Japan has issued fresh warnings about potential intervention to stem the yen's decline, but the currency remains under pressure from the wide interest rate differential between the US and Japan.
Pound Recovers Modestly
GBP/USD recovered slightly on Friday but remained below 1.3350 during the European morning, following a sharp decline in the previous session. The pound's recovery was limited as investors continued to assess the broader currency market landscape and the impact of the latest US tariff announcements.
PMI Data in Focus
Looking ahead, investors are turning their attention to the preliminary July Purchasing Managers' Index (PMI) figures from the Eurozone, the UK, and the US. These data points will provide fresh signals on economic activity and could influence the direction of financial markets in the coming days. The dollar's trajectory will likely depend on whether the data reinforces expectations of a resilient US economy or points to a slowdown.
This article is for informational purposes only and does not constitute financial advice.
