Dollar Holds Firm but Remains on Track for Weekly Loss Amid US-Iran Peace Talks

The U.S. dollar stabilized on Friday but was still heading toward a weekly decline as investors closely monitored negotiations aimed at ending the conflict in the Middle East.

Market participants also focused on the highly anticipated SpaceX initial public offering, which raised $75 billion and surged nearly 20% during its Nasdaq debut, drawing significant attention from global investors.

Euro Near Weekly High After ECB Rate Hike

The euro traded little changed at $1.157, remaining close to a one-week high and on track for weekly gains following the European Central Bank’s first interest rate increase in three years.

The ECB’s policy decision provided additional support for the common currency, helping it outperform the U.S. dollar throughout the week.

Markets Watch Developments in US-Iran Negotiations

Investor sentiment remains heavily influenced by ongoing discussions surrounding a potential peace agreement between the United States and Iran.

Reports from Western, Pakistani, and Iranian sources outlined details of a proposed memorandum that could help end the conflict in the Gulf region. However, U.S. President Donald Trump rejected reports suggesting the agreement heavily favored Iran, calling those claims inaccurate.

Trump’s announcement on Thursday that a deal could be nearing completion triggered a broad market reaction. Stocks rallied, oil prices declined, and the U.S. dollar weakened as investors shifted toward riskier assets.

According to John Velis, foreign exchange and macro strategist at BNY, markets are now pausing to evaluate both the likelihood of a peace agreement and the broader impact of the SpaceX IPO on global capital flows.

Dollar Movement Reflects Shifting Risk Appetite

The U.S. dollar has recently traded as a geopolitical barometer, strengthening during periods of heightened tensions and weakening when prospects for diplomacy improve.

The U.S. Dollar Index, which tracks the greenback against a basket of major currencies, was largely unchanged at 99.75 after falling to a one-week low on Thursday.

Against the Japanese yen, the dollar rose 0.18% to 160.23, remaining near levels that have previously sparked concerns about possible intervention from Japanese authorities.

Meanwhile, the British pound traded near $1.341 despite data showing the UK economy contracted by 0.1% in April. Currency markets largely ignored the economic report as attention remained fixed on Middle East developments.

The dollar also strengthened against the Swiss franc, rising 0.21% to 0.7968.

Federal Reserve Remains in Focus

Investors are also preparing for next week’s Federal Reserve meeting, which will be the first policy-setting meeting chaired by Kevin Warsh.

Recent economic data showed U.S. producer prices rose more than expected in May, reinforcing concerns that inflation remains elevated.

Financial markets widely expect the Federal Reserve to leave interest rates unchanged within the 3.50% to 3.75% range. However, traders still see a greater than 50% probability of another rate hike before the end of the year.

Expectations for tighter monetary policy eased slightly following Trump’s comments regarding a potential peace agreement with Iran, as lower oil prices could help reduce inflation pressures.

Bitcoin Rises While Ethereum Slips

Cryptocurrency markets delivered mixed performance on Friday.

Bitcoin gained approximately 0.4% and traded near $63,600 as improving risk sentiment supported digital assets.

Ethereum moved in the opposite direction, slipping 0.3% to around $1,666.

The broader crypto market remained relatively stable as investors balanced geopolitical developments, monetary policy expectations, and the impact of the SpaceX IPO on overall market liquidity.

Market Outlook

The U.S. dollar remains under pressure as investors assess the possibility of a diplomatic breakthrough between the United States and Iran. At the same time, falling oil prices, shifting expectations for Federal Reserve policy, and strong demand for the SpaceX IPO continue to influence global financial markets.

The next major catalyst for currencies, commodities, and cryptocurrencies is likely to come from developments in Middle East negotiations and next week’s Federal Reserve meeting.