Euro eases from one-week high as traders assess Middle East developments

EUR/USD retreats from a one-week high as the US Dollar rebounds.
Safe-haven demand supports the Greenback amid evolving Middle East developments.
Markets await next week's US and Eurozone inflation data for fresh policy clues.

Vishal Chaturvedi FXStreet

EUR/USD trims gains on Friday as the US Dollar (USD) rebounds while traders digest the latest developments in the Middle East. At the time of writing, the pair is trading around 1.1433, easing from a one-week high of 1.1460 touched earlier during the Asian session.

In a post on Truth Social, US President Donald Trump said Iran had asked to continue talks and that the United States had agreed, while emphasizing that Washington had informed Tehran that the ceasefire was "over."

Trump's remarks came after the US and Iran exchanged military strikes following attacks by Iran's Islamic Revolutionary Guard Corps (IRGC) on commercial vessels transiting the Strait of Hormuz earlier this week.

Earlier on Friday, Reuters reported that Qatari mediators are in Iran for talks aimed at creating conditions for broader negotiations.

As the situation remains fluid, the US Dollar continues to benefit from safe-haven demand. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading around 100.85 after rebounding from an intraday low of 100.60.

Meanwhile, expectations that the Federal Reserve (Fed) will keep monetary policy restrictive amid heightened inflation risks continue to provide additional support to the Greenback.

According to the CME FedWatch Tool, markets are currently pricing in a 58% probability of a rate hike at the September meeting. At the same time, traders also expect the European Central Bank (ECB) to raise interest rates again later this year.

Attention now turns to next week's final Eurozone inflation data, alongside US Consumer Price Index (CPI), for fresh clues on the interest rate outlook

Societe Generale said EUR/USD has staged a modest rebound after finding support near 1.1325, although the recovery lacks strong bullish confirmation. The bank sees the 1.1475-1.1500 zone as key resistance, while a break below 1.1390 could revive the broader downtrend.

Economic Indicator

Core Harmonized Index of Consumer Prices (MoM)

The Core Harmonized Index of Consumer Prices (HICP) measures changes in the prices of a representative basket of goods and services in the European Monetary Union. The HICP, released by Eurostat on a monthly basis, is harmonized because the same methodology is used across all member states and their contribution is weighted. The MoM figure compares the prices of goods in the reference month to the previous month. Core HICP excludes volatile components like food, energy, alcohol, and tobacco. The Core HICP is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.

GBP/USD recedes from tops around 1.3450

GBP/USD holds on to moderate gains above 1.3400 the figure on Friday. Optimism surrounding the UK government’s leadership transition and expectations of further BoE tightening support the British Pound, while easing tensions in the Middle East and fading Fed rate-hike expectations weigh on the US Dollar.

EUR/USD flirts with daily lows near 1.1420

EUR/USD struggles to build on Thursday's gains and trades with marginal losses near 1.1420 at the end of the week. With no major economic data due, lingering uncertainty over the US-Iran conflict keeps investors cautious, limiting the pair's upside.

Gold resumes the downside, hovers around $4,100

Gold struggles to extend Thursday’s rebound and trades in a narrow range around the $4,100 yardstick per troy ounce on Friday. Uncertainty surrounding the Middle East conflict limits the precious metal’s upside, which is also under pressure amid rising US Treasury yields across the curve.

Week ahead – US CPI and Warsh testimony to take centre stage, BoC eyed too

US inflation report and Warsh testimony to headline the week. Dollar to dominate amid slew of other US data and Mideast tensions. Amid fresh Iran escalation, China GDP to shed light on Q2 impact. Bank of Canada not expected to follow RBNZ with rate hike.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June Federal Open Market Committee meeting landed mid-round-trip, describing a world that had already stopped existing.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.