Forex Today: Renewed hopes of US-Iran peace deal help market mood improve
Here is what you need to know on Friday, June 12:
Risk flows return heading into the weekend as financial markets turn cautiously optimistic about the United States (US) and Iran reaching a truce deal soon. In the second half of the day, the US economic calendar will feature the University of Michigan's (UoM) preliminary Consumer Sentiment Index for June.
In a Truth Social post on Thursday, US President Donald Trump threatened that they will be hitting Iran "very hard tonight." While speaking to Fox News, Trump reiterated that there would be more bombing and said that he would prefer taking the Kharg Island. The US Dollar (USD) gathered strength with the immediate reaction, with the USD Index climbing to its highest level since late March above 100.30. Meanwhile, the data from the US showed that that producer inflation, as measured by the change in the Producer Price Index (PPI), rose to 6.5% on a yearly basis in May, marking its highest print since 2022.
However, Trump announced later that he called off strikes, claiming that they are close to reaching an agreement with Iran. Although Iran said that a deal is yet to be finalised, risk-sensitive assets rallied and the USD came under renewed bearish pressure. Following the earlier advance, the USD Index reversed its direction in the late American session and lost about 0.4% on the day, while Wall Street's main indexes registered impressive gains.
Early Friday, the USD Index stays flat on the day at around 99.70 and US stock index futures trade marginally higher. According to Iran's Mehr news agency, the Memorandum of Understanding (MoU) with the US includes the US' commitment to lifting sanctions, withdrawing its forces from around Iran and lifting the blockade. Moreover, the MoU also reportedly contains items about the reopening Strait of Hormuz, cancelling oil sanctions, and releasing Iran's frozen funds.
The European Central Bank (ECB) raised key rates by 25 basis points (bps) on Thursday and said that in baseline of new Eurosystem staff projections, headline inflation is expected to average 3.0% in 2026, 2.3% in 2027 and 2.0% in 2028. After coming in within a touching distance of 1.1500 in the early American session, EUR/USD turned north and gained nearly 0.4% on the day. Early Friday, EUR/USD fluctuates in a narrow range above 1.1550.
Gold (XAU/USD) gathered bullish momentum late Thursday and recovered above $4,200, rising 3.4% on the day and erasing a portion of its weekly losses in the process. XAU/USD holds steady above $4,200 in the European morning on Friday.
GBP/USD benefited from the renewed USD weakness on Thursday and ended the day in positive territory above 1.3400 before entering a consolidation phase on Friday. The data from the UK showed earlier in the day the Gross Domestic Product contracted by 0.1% on a monthly basis in April. In this period, the Industrial Production was unchanged and the Manufacturing Production was up 0.4%.
USD/JPY fell more than 0.3% but managed to hold above 160.00. The pair stays quiet early Friday and was last seen trading marginally higher on the day near 160.15.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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