The Dollar Index (DXY00) closed essentially unchanged on Friday. A 2.2‑basis‑point increase in the 10‑year Treasury yield provided support to the dollar by widening its interest‑rate advantage, while concerns over safe‑haven demand kept pressure on the currency amid expectations of a near‑term US‑Iran agreement that could halt hostilities and reopen the Strait of Hormuz.
Reports on Friday suggested that a preliminary US‑Iran peace agreement might be reached as early as this weekend, potentially ending hostilities, reopening the Strait of Hormuz, and lifting the U.S. blockade on Iranian oil exports. Subsequent talks would address more complex matters, including sanctions, the unfreezing of roughly $24 billion in Iranian assets, and the resolution of Iran’s nuclear program. Tehran indicated that its leadership still needs to decide on the interim deal.
The University of Michigan’s June Consumer Sentiment Index climbed 4.1 points to 48.9, surpassing the consensus forecast of 46.0. Meanwhile, one‑year inflation expectations fell to 4.6% from 4.8% in May, coming in below the expected 4.9%, and the 5‑ to 10‑year inflation outlook dropped to 3.4% from 3.9%, undercutting the projected 3.8%.
Swap markets are pricing a 4% probability of a 25‑basis‑point rate cut at the next FOMC meeting on June 16‑17.
The EUR/USD pair slipped by 0.02% on Friday. The euro found support after the European Central Bank increased its deposit rate by 25 basis points on Thursday, bolstering its interest‑rate advantage. Nonetheless, the ECB lowered its 2026 Eurozone GDP forecast to 0.8% from 0.9% and lifted its 2026 core‑inflation outlook to 2.5% from 2.3%.
Market participants assign a 37% probability to a 25‑basis‑point rate hike by the ECB at its July 23 policy meeting.
The USD/JPY pair edged up 0.16% on Friday. Anticipation of a resolution to the US‑Iran dispute, which could lower oil prices and bolster Japan’s import‑dependent economy, underpins the yen. Expectations also exist that the Bank of Japan will raise rates at next week’s policy meeting.
Swap markets are pricing a 97% probability of a 25‑basis‑point rate hike by the BOJ at its June 16 policy meeting.
August COMEX gold (GCQ26) rose 124.80 points, or 3.03%, to close higher on Friday, while July COMEX silver (SIN26) gained 3.973 points, a 6.21% increase.
Gold and silver experienced short covering on Friday after gold slipped to a six‑and‑a‑half‑month low on Thursday and silver fell to a two‑and‑a‑half‑month low. Both metals found support as oil prices dropped sharply, a development that signals a dovish tone for G‑7 monetary policy.
Bearish pressure on precious metals on Friday stemmed from higher U.S. Treasury yields and waning safe‑haven demand amid expectations of an imminent US‑Iran agreement. Additional downward pressure came from Thursday’s 25‑basis‑point ECB rate hike and the market’s anticipation of a BOJ rate increase at its upcoming meeting.
Recent fund outflows have been bearish for precious metals, with long positions in gold ETFs slipping to a six‑month low on Wednesday—the lowest since February 27, when they hit a 3.5‑year high. Similarly, long positions in silver ETFs fell to a ten‑month low on Monday, down from a 3.5‑year high reached on December 23.
Robust central‑bank demand continues to support gold prices, as China’s People’s Bank of China increased its gold reserves by 320,000 ounces in May, bringing total holdings to 74.96 million troy ounces—the largest monthly rise in 17 months and the nineteenth consecutive month of accumulation.