Market Overview

The U.S. dollar index slipped 0.1% in London trade on Friday, setting up a 0.3% decline for the week after touching a one‑week low overnight. In contrast, the euro hovered near its strongest level in a week and was positioned for its best weekly performance in more than a month, buoyed by the European Central Bank’s first interest‑rate increase in nearly three years.

Iran Peace‑Deal Optimism

U.S. President Donald Trump announced on Thursday that a peace agreement with Iran could be signed as early as the weekend. The prospect of a de‑escalation in the Middle East lifted risk‑on sentiment across global markets and contributed to oil prices falling to their lowest levels in about two months as investors anticipated a reopening of energy supply routes.

Producer‑Price Data

U.S. producer‑price data for May showed a larger‑than‑expected rise, driven by higher energy costs linked to earlier Middle‑East disruptions. However, core producer‑price inflation increased less than forecast, easing some concerns about an imminent Federal Reserve rate hike and shifting market expectations for any further tightening to later in the year.

United Kingdom Outlook

British economic data revealed a 0.1% contraction in GDP for April, marking the first monthly decline since August. Despite the slowdown, the pound remained largely unchanged and stayed on track for its strongest week in nearly a month as improved risk appetite reduced demand for the safe‑haven dollar. Market participants are watching the June 18 Makerfield by‑election, which could have significant political implications for Prime Minister Keir Starmer’s government, and the upcoming Bank of England meeting, where rates are widely expected to be left unchanged.

> “One month’s data would usually be treated with an abundance of caution, but rising prices associated with the conflict in the Middle East are expected to continue putting pressure on a fragile UK economy in the months ahead,” said Danni Hewson, head of financial analysis at AJ Bell.

Federal Reserve Expectations

The Federal Reserve is broadly expected to keep policy rates unchanged at its meeting next week, focusing instead on updated economic projections and Chair Jerome Powell’s guidance for clues on future moves. The CME FedWatch tool indicates the market is pricing roughly a 60% probability of a rate increase by December.

Summary of Key Figures

  • US Dollar Index: –0.1% intraday, –0.3% weekly.
  • Euro: Near weekly high, supported by ECB rate hike.
  • Oil: Lowest in ~2 months on Iran‑deal optimism.
  • May Producer Prices: Above expectations; core component below forecast.
  • UK GDP (April): –0.1% YoY.
  • Sterling: Flat, on course for strongest week in ~1 month.
  • CME FedWatch: ~60% chance of a Fed hike by December.