The US dollar maintained its strength against major peers on Friday, supported by escalating geopolitical tensions in the Middle East and a cautious market mood. Investors are now turning their attention to upcoming US economic releases, including housing starts and consumer sentiment data, for further clues on the economic outlook.
Dollar Recovers After Two-Day Decline
The greenback regained momentum on Thursday, snapping a two-day losing streak. The US Dollar Index ended the session in positive territory, buoyed by better-than-expected initial jobless claims figures. The stronger labor market data provided a tailwind for the currency, while heightened risk aversion across global markets further boosted demand for the dollar as a traditional safe-haven asset.
Early Friday, the USD Index held onto modest gains near the 100.80 level during European trading, reflecting continued investor caution.
Geopolitical Tensions Weigh on Sentiment
Market sentiment remained fragile as geopolitical risks dominated headlines. The United States conducted airstrikes for a sixth consecutive night, focusing on southern Iran. Reports from Al Jazeera indicated that civilian infrastructure in Bandar Abbas, including power facilities and a train station, had been hit. Meanwhile, Reuters reported that Iran had asked Yemen's Houthi militia to prepare to close the Red Sea oil route if US strikes targeted Iranian power infrastructure. This development raised concerns about potential disruptions to global energy supplies, adding to the cautious tone across financial markets.
Reflecting the flight to safety, US stock index futures declined between 0.8% and 1.5% during the European morning session, signaling reduced appetite for riskier assets.
Major Currency Pairs Under Pressure
The stronger dollar weighed on several major currencies. The euro struggled to recover, with EUR/USD trading below the 1.1450 mark on Friday. The British pound also remained under pressure, with GBP/USD extending losses toward 1.3450 after falling nearly 0.5% in the previous session.
USD/JPY traded in a narrow range below 162.50. Japan's Finance Minister, Satsuki Katayama, reiterated on Friday that authorities are ready to respond to currency movements as needed, signaling vigilance against excessive volatility.
Indian Rupee Edges Higher
The Indian rupee opened marginally stronger against the dollar, with USD/INR slipping toward 96.30. The move followed intervention by the Reserve Bank of India, which helped support the rupee despite the broader strength of the US dollar. The central bank's actions provided a buffer for the currency amid the prevailing risk-off environment.
For broader context on currency market dynamics, see our analysis in Currency Markets Cautious as Fed Remarks, US Data, and Iran Tensions Dominate.
Outlook
With geopolitical tensions continuing to shape investor sentiment, markets will closely monitor the upcoming US economic releases for additional direction. The data calendar includes the June Export Price Index, Import Price Index, Housing Starts, and the preliminary July Consumer Sentiment Index from the University of Michigan. These figures could provide further insights into the health of the US economy and influence the dollar's trajectory.
For related market moves, see FTSE 100 Dips 0.2% as Iran Tensions Weigh; Midcaps Rise on Rotork Takeover and FTSE 100 Slips 0.1% as Middle East Tensions Offset Energy Rally.
This article is for informational purposes only and does not constitute financial advice.
