The euro declined in European trading on Friday against a basket of global currencies, extending its losses for a second consecutive session against the US dollar and trading near six-week lows, as investors continued favoring the US currency as the preferred alternative safe-haven investment while awaiting further developments in peace talks between the United States and Iran.

This week saw increased pricing for the possibility of the European Central Bank raising interest rates at its June meeting, while investors await further economic data from the eurozone to reassess those expectations.

Price Overview

• Euro exchange rate today: The euro declined against the dollar by 0.1% to $1.1605, from today’s opening level at $1.1617, while recording a session high at $1.1621.

• The euro ended Thursday’s trading down by less than 0.1% against the dollar, resuming losses that had paused the previous day during recovery attempts from a six-week low at $1.1583.

US Dollar

The US Dollar Index rose 0.1% on Friday, maintaining gains for a second consecutive session near six-week highs, reflecting the continued positive performance of the US currency against a basket of global currencies.

In addition to support from the recent broad rise in long-term US Treasury yields, investors continue favoring the US dollar as a safe haven amid close monitoring of developments in peace negotiations between the United States and Iran.

US-Iran Talks

• Iranian news agencies: The final version of the US-Iran agreement has been reached through Pakistani mediation, with an official announcement expected within the next few hours.

• US Secretary of State Marco Rubio said there are “good signs” regarding the possibility of reaching a peace agreement.

• Donald Trump: The United States is in the final stages of talks with Iran.

• Reports: Iran’s uranium stockpile and control over the Strait of Hormuz remain key points of disagreement between Washington and Tehran.

European Interest Rates

• Sources told Reuters: The European Central Bank is highly likely to raise interest rates in June due to inflation expectations moving toward an undesirable scenario.

• This week, money market pricing for the probability of the European Central Bank raising interest rates by 25 basis points in June increased from 60% to above 70%.

• Investors are awaiting further eurozone economic data on inflation, unemployment, and wages to reassess those expectations.

The Japanese yen declined in Asian trading on Friday against a basket of major and minor currencies, extending its losses for a second consecutive session against the US dollar and moving close to a three-week low, while heading toward a second straight weekly loss as investors continued favoring the US dollar as the preferred alternative safe-haven investment ahead of further developments in US-Iran peace talks.

Data released today in Tokyo showed Japanese core inflation slowing to its lowest level in more than four years, easing inflationary pressures on policymakers at the Bank of Japan and reducing expectations for a Japanese interest rate hike in June.

Price Overview

• Japanese yen exchange rate today: The dollar rose against the yen by around 0.15% to ¥159.13, from today’s opening level at ¥158.93, while recording a session low at ¥158.87.

• The yen ended Thursday’s trading down by less than 0.1% against the dollar, hitting its weakest level in three weeks at ¥159.34 after the release of strong US economic data.

Weekly Trading

During this week’s trading, which officially concludes with today’s settlement, the Japanese yen is currently down 0.25% against the US dollar, on track for a second consecutive weekly loss.

US Dollar

The US Dollar Index rose around 0.1% on Friday, maintaining gains for a second straight session near six-week highs, reflecting the continued positive performance of the US currency against a basket of global currencies.

In addition to support from the recent broad rise in long-term US Treasury yields, investors continue favoring the US dollar as a safe haven while closely monitoring developments in peace negotiations between the United States and Iran.

US-Iran Talks

• Iranian news agencies: The final version of the US-Iran agreement has been reached through Pakistani mediation, with an official announcement expected within the next few hours.

• US Secretary of State Marco Rubio said there are “good signs” regarding the possibility of reaching a peace agreement.

• Reports: Iran’s uranium stockpile and control over the Strait of Hormuz remain among the main points of disagreement between Washington and Tehran.

Core Inflation

Data released today in Tokyo showed Japan’s core consumer price index rising 1.4% year-on-year in April, the slowest pace since March 2022, below market expectations for a 1.7% increase, after a 1.8% rise in March.

These figures clearly indicate easing inflationary pressures on policymakers at the Bank of Japan, reducing the likelihood of Japanese interest rate hikes during this year.

Japanese Interest Rates

• Following the data above, pricing for the probability of the Bank of Japan raising interest rates by a quarter percentage point at its June meeting declined from 85% to 65%.

• Investors now await additional data on inflation, unemployment, and wage growth in Japan to reassess those expectations.

Oil prices pulled back from Thursday’s session highs as investor hopes grew that the United States and Iran could reach an agreement preventing a return to war.

US crude oil rose 16 cents to $98.42 per barrel by 1:30 p.m. Eastern Time, while global benchmark Brent crude fell 31 cents to $104.71 per barrel.

Prices had surged more than 3% earlier in the session after Reuters reported that Iran’s Supreme Leader Ayatollah Mojtaba Khamenei issued a directive ordering enriched uranium to remain inside Iran.

Markets viewed Khamenei’s position as a potential complication for negotiations with the United States, especially as US President Donald Trump has repeatedly stated that dismantling Iran’s nuclear program remains a primary objective of Washington’s war effort.

Trump said earlier this week that he canceled imminent airstrikes against Iran to give diplomacy more time, following requests from US allies in the Arabian Gulf region. Tehran and Washington have made little significant progress toward an agreement since reaching a fragile ceasefire last month.

Trump also warned on Wednesday that military operations could resume if Iran failed to provide “100% good answers” during negotiations, although he said he was willing to wait a few more days to allow talks to continue.

Speaking to reporters at Joint Base Andrews in Maryland, Trump said regarding potential US military action:

“We are fully prepared. We need the right answers, and they need to be 100% good answers.”

He added: “If I can prevent war by waiting a few days, and if I can save lives by waiting a little longer, I think that’s a great thing.”

Meanwhile, shipping traffic through the Strait of Hormuz continues facing severe disruptions due to Iran’s blockade of the waterway, which remains a vital route for global oil supplies.

The International Energy Agency warned on Thursday that the oil market could enter the “red zone” this summer if the Strait of Hormuz is not reopened. Executive Director Fatih Birol said global oil inventories are expected to decline as demand rises during the summer travel season.

Gold prices fell 1% on Thursday after rising oil prices fueled inflation concerns, strengthening bets on higher US interest rates and pushing Treasury yields and the dollar higher, adding further pressure on the precious metal.

Spot gold declined 1% to $4,500.07 per ounce. The yellow metal had risen more than 1% during Wednesday’s US trading session after hitting its lowest level since March 30.

US gold futures for June delivery also fell 0.7% to $4,502.90 per ounce.

Oil prices rose more than 2% following a Reuters report stating that Iran’s Supreme Leader issued a directive prohibiting the transfer of highly enriched uranium outside the country.

Giovanni Staunovo, analyst at UBS, said: “Fundamentally, everything still revolves around negotiations between Iran and the United States, and within that context we have seen some uncertainty regarding the possibility of reaching an agreement. However, oil prices are now placing increasing pressure on gold.”

The report added that directives from Ayatollah Mojtaba Khamenei could further frustrate US President Donald Trump and complicate talks aimed at ending the US-Israeli war against Iran.

Gold has lost more than 15% of its value since the outbreak of the war in late February, which disrupted shipping through the Strait of Hormuz, pushing energy prices sharply higher and intensifying inflation concerns.

The US dollar strengthened, making dollar-denominated gold more expensive for holders of other currencies, while US 10-year Treasury yields resumed their climb, increasing the opportunity cost of holding non-yielding bullion.

Staunovo added: “Higher oil prices, which push inflation upward, place pressure on central banks to keep interest rates elevated or even raise them further. Therefore, this remains a negative factor for gold in the near term.”

Although gold is traditionally viewed as a hedge against inflation, it tends to struggle during periods of rising interest rates.

According to the CME Group FedWatch tool, traders are now pricing in a 58% probability that the Federal Reserve will raise interest rates by at least 25 basis points this year, compared with a 48% probability just one day earlier.