The dollar weakened slightly on Friday as markets appeared cautiously optimistic that a proposed ceasefire agreement with Iran could help end disruptions to energy markets and remove pressure on the global economy. Uncertainties remained, however, as Iran said it was looking for actions, not words from the United States after sources had said President Donald Trump was weighing an initial U.S.-Iranian agreement to extend a ceasefire and open the Strait of Hormuz. A senior Iranian source told Reuters on Friday a political understanding has been reached between Iran and the United States over the Iran war, but it has not yet been finalized, and that U.S. Donald Trump's claim that uranium would be unearthed by the U.S. was not true.

Chicago PMI came in at 62.7, above the consensus forecast of 50.5 and marking a sharp recovery from the previous reading of 49.2.

Fed officials continued to signal the U.S. central bank may need to raise interest rates in the future if the war in the Middle East leads to a persistent increase in already-high inflation. Philadelphia Fed President Anna Paulson said it was healthy for markets to weigh the possibility of a tighter policy outlook. Fed Vice Chair for Supervision Michelle Bowman said the Middle East war's impact on the economy, while still being measured, could lead to persistent rises in inflation that might require tighter monetary policy. Kansas City Fed President Jeffrey Schmid said that already-hot levels of inflation make it harder to assume the current energy shock will have only a temporary impact on pricing and can be ignored by the central bank. Minneapolis Fed President Neel Kashkari said that April inflation data raised the need to pay attention to inflation risk more closely.

Treasury yields fell 2-3 bps at the front end and belly of the curve but were little changed further out. The 2s-10s curve steepened 1.21bps.

The S&P 500 was trading 0.25% higher in New York afternoon after extending its record run, as Dell results drove tech shares higher.

WTI crude oil was down 1.73% and on track for its steepest weekly decline since early April, helped by anticipation of a ceasefire extension.

Copper was down 0.61% while gold rose 1.51%.

Heading toward the close: EUR/USD +0.09%, USD/JPY +0.03%, GBP/USD +0.11%, AUD/USD +0.32%, DXY -0.11%, EUR/JPY +0.13%, GBP/JPY +0.11%, AUD/JPY +0.31%.(Burton Frierson)

• NY opened near 0.7155 after AUD/USD traded 0.7150 in Europe's morning

• Rally ensued on report Pres. Trump to make determination on deal with Iran

• USD, US yields fell & USD/CNH hit a fresh 3-1/4-year low of 6.7605

• Gold, silver and copper moved upward while stocks hit new all-time highs

• AUD/USD rallied above the 21-DMA, hit 0.7200 then neared 0.7185, was up +0.32% late

• May's monthly doji indicates either pause in long-term rally or reversal

• Widening Bollinger bands indicates rally could resume however
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

JP Morgan Research discusses Gold technical analysis.

"Gold has fallen to challenge the upper end of the 4200-4400 support zone we've believed would define the lower end of the 1H26 trading range. This zone includes the 200-day moving average. We are looking for the market to base in that area, and we continue to believe the multi-month range marks consolidation within a longer-term bull trend, as opposed to the formation of a longer term bearish trend reversal," JPM notes.

"If our view is incorrect and the market breaks below that and other support close to 4000, it would mark a major game changer for the longer-term trend, which again form a bottom pattern in that support zone...," JPM adds.

• USD/JPY grinding in a narrow 158.98-159.38 range - market caution remains ahead of 160

• MoF confirms Apr-May intervention at JPY 11.73trillion

• Bigger than both Apr-May (JPY 9.79trillion) and Jul 2024 (JPY 5.53trillion) respectively

• 160 effectively a hard cap for now

• Risk-reward for longs deteriorates sharply the closer spot is to 160

• Downside cushioned by cloud support (156.52-158.87) - keeping dips shallow

• Net-net: the sideways drift should persist
JPY performance after intervention


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

Bank of America Global Research expects the USD to stay bid into the Summer.

"DXY has traded in a narrow range since mid-May, caught between widening rate differentials and sliding crude oil prices. Hopes of an Iran peace deal have no doubt played a role in declining energy costs but we remain cautious on oil prices even if negotiators secure a near-term deal to resume passage through the Strait. The relative stability in crude oil prices over the past few months is at least partly a function of subdued Chinese import demand, in our view. Any full or partial reopening of the Strait would be met with a surge in demand for strategic oil barrels, a process that we see extending for about 18-24 months," BofA notes.

"Next week's non-farm payrolls data and Fed beige book release are potential catalysts for DXY to break out of its recent range and we continue to like EUR/USD put spreads. ADP private payrolls, jobless claims and BofA's employment report for April 2026 suggest labor demand remains robust. Despite a slight miss on inflation and spending data this week, consumer spending also remains robust. Notwithstanding a modest headwind from month-end rebalancing flows, we also see a seasonal tailwind for the dollar (vs. CNY) as we enter dividend payment season for Hong Kong-listed Chinese companies," BofA adds.

Sterling is likely to remain confined to near-term ranges as repeated failures by bears to sustain momentum below the psychological 1.3400 threshold and bulls' inability to take out resistance above 1.35, leave the currency lacking a clear directional catalyst. The pound edged slightly lower following less-hawkish commentary from Bank of England Governor Andrew Bailey, who signaled that policymakers feel no immediate urgency to raise interest rates. Tempering an otherwise bearish climate for sterling is optimism over an imminent U.S.-Iran ceasefire extension, currently awaiting approval from U.S. President Donald Trump. On the data front, Thursday’s slightly below-forecast U.S. PCE price index tempered hawkish Fed policy expectations, adding a less-dollar-friendly layer to the macro backdrop, which may prod sterling bulls to recast their focus on 1.35.

From a positioning standpoint, today's upcoming IMM positioning data is anticipated to reveal a decrease in GBP short bets. This aligns with the pound's 0.35% rise in the recently closed reporting period and the broader trend of reduced geopolitical and domestic UK risks, which had previously fueled significant sterling selling versus the dollar.

Technically, the pair is cradled by immediate support at the bruised 200-DMA of 1.3423 and recent trend lows just below 1.3380, with more significant support by the lower 30-day Bolli at 1.3352. On the upside, resistance sits at the daily cloud top by 1.3451, followed closely by 1.3481, the 50% Fib of 1.3658-1.3304 and capped by recent highs at 1.3504 and 1.3509 earlier this week.
GBP$ Chart:


(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

Credit Agricole CIB Research maintains a short AUD/NZD position in spot targeting a move towards 1.16.

"The US and Iran grinding towards a deal to re-open the Strait of Hormuz is also weighing on oil prices and unwinding some of the terms of trade shift in favour of the AUD over the NZD. Importantly, even if a US-Iran accord is reached, there is a fair amount of inflation baked into the Australian and NZ economies, which both central banks will have to respond to. But the RBA is ahead of the curve, having raised rates three times already, and the RBNZ must play some catch up.

"The hawkish pivot by the RBNZ combined with softer Australian inflation is eroding the RBA-RBNZ rate divergence. Even today, NZ data pointed to bounces in business and consumer confidence in May, reducing one of the key reasons cited by internal RBNZ MPC members for resisting a rate hike this week while external members voted for a hike," CACIB notes.

"We continue to think there will be a grind lower in the Australia-NZ short-term rates differential back to its over 30Y average, bringing AUD/NZD likewise back towards its 30Y average of 1.16. The relative shift in the terms of trade advantage between Australia and NZ will also be a factor driving the exchange rate lower. We remain short AUD/NZD," CACIB adds.

ANZ Research discusses JPY outlook and the scope for anther wave of Japan's MoF intervention.

"USD/JPY is holding near 160, keeping intervention risk in play. Intervention can smooth the pace, not change the trend. A durable move in the JPY needs more credible BoJ normalisation and lower energy prices. Official rhetoric has had limited impact, and demand for upside USD/JPY protection has increased as spot approaches prior intervention levels," ANZ notes.

"Recent BoJ communication has been incrementally more hawkish, and the June meeting is now live. JPY weakness is feeding into inflation expectations, long-end JGB yields and the domestic political cost of staying too accommodative. But the macro backdrop is not yet strong enough on its own to deliver sustained JPY strength. A June hike, or a more hawkish signal from Governor Ueda, would strengthen the medium-term case for JPY. The BoJ meeting on 15–16 June is key. A hike with hawkish guidance may support a JPY rally, but this also will have to go hand in hand with energy prices moving lower reducing the negative terms of trade shock that is weighing on both the JPY and domestic fiscal spending plans," ANZ adds.

• AUD/USD traded a tight 0.7170-0.7150 range overnight, NY opened near 0.7160

• Pair was down -0.06% despite drops in US yields & USD/CNH

• Rallies in gold, silver and equities could not inspire AUD/USD bulls

• Investors sidelined as they are likely waiting for Pres. Trump's decision on Iran deal

• Should the President agree the deal risk-on may ensue & AUD/USD might rally

• Monthly doji, falling monthly RSI are concerns for AUD/USD bulls

• Pair's hold above the 10- & 55-DMAs and the daily cloud give bulls some comfort
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

• Yen going nowhere fast, ranges compressing (158.98-159.38) with conviction remaining low

• Japanese FinMin back on the wires reiterating readiness to act against FX volatility

• USD/JPY holds comfortably above the daily cloud (156.52-158.87) - technically constructive

• Sideways drift looks set to continue in the near-term

• Dips remain well-supported as the preference for carry persists

• Aside from cloud support, the 100DMA (157.68) offers a cushion. Resistance = 160
USDJPY daily chart


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

• Cable marginally softer this morning, price action remains choppy with no clear signs of letting up

• Spot caught a bid Thursday on U.S.-Iran ceasefire extension headlines, but move lacked follow-through

• No conviction on either side, which leaves the pair in a sideways chop

• 200DMA (1.3423) acting as a magnet for now, though bias tilts lower from here

• Recent soft UK data has trimmed BoE hike pricing

• UK politics also a slow-burn risk - June 18 by-election worth keeping on the radar as we near event

• Support: 1.3350-70. Resistance: 1.3485-1.3500
GBPUSD daily chart


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

• A wealth of USD/JPY exotic options - barriers and triggers from 160.00 - are set to expire next week

• The market is consequently awash with related gamma - evidenced by tight FX ranges and low implied volatility

• USD/JPY FX option implied volatility trades its lowest levels in 4-years - benchmark 1-month expiry just 6.3

• Yet below the surface calm, low delta strike premiums have been increasing - a warning sign that many might miss

• Butterfly spreads, which measure low-delta wing premiums relative to ATM implied volatility, have stretched to extremes

• One-week expiry 10 delta butterfly spread trades 2.4 - the highest level in 6-years - flagging a market wary of sharp moves

• Owning these options would benefit holders if USD/JPY were to break-out and volatility spiked

• If those 160.00 barriers are taken out before expiry, that's exactly what could happen
USD/JPY FX option implied volatility


USD/JPY 1-week expiry 10 delta butterfly spread


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• Positive headlines to end Mid-East conflict are risk friendly and a weight on USD - supporting EUR/USD

• However, while negotiations continue and the Straight of Hormuz remains closed, economic concerns grow

• EUR/USD only matched Wed's 1.1661 peak after Thursdays ceasefire agreement - bulls yet to force a breakout

• A close above 55-dma 1.1654 and more important 200-dma 1.1682 would embolden buyers

• Daily cloud 1.1647-1.1702 adds to resistance, while support rests at recent daily lows 1.1586-77

• FX options endorse the situation - implied volatility at lows since Jan and lacks meaningful directional risk premium

• The hedging of more huge FX option expiries is also helping to shackle EUR/USD of late
EUR=EBS


EUR/USD FXO implied volatility


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• FX options expire at 10am New York/15:00 GMT on Friday May 29

• EUR/USD: 1.1575-80 (1.1BLN), 1.1600 (1.5BLN), 1.1615-25 (1.1BLN), 1.1650-55 (2.4BLN)

• 1.1660-70 (560M), 1.1675 (246M), 1.1700 (1.2BLN)

• USD/CHF: 0.7840-55 (508M), 0.7875-80 (260M), 0.7900 (620M), 0.7910-20 (420M)

• EUR/GBP: 0.8650 (205M), 0.8700 (316M)

• GBP/USD: 1.3390-1.3400 (703M), 1.3480-85 (873M), 1.3500-15 (440M)

• AUD/USD: 0.7090-0.7100 (1.2BLN), 0.7115-25 (2.9BLN), 0.7140 (380M), 0.7155 (621M)

• 0.7175 (882M), 0.7200-10 (1BLN)

• USD/CAD: 1.3775 (262M), 1.3790-1.3800 (370M), 1.3850-65 (492M), 1.3895-1.3900 (724M)

• USD/JPY: 158.45-50 (1BLN), 159.00 (581M), 160.00 (762M)

• EUR/JPY: 185.00 (300M). AUD/JPY: 113.00 (395M)(Richard Pace is a Reuters market analyst. The views expressed are his own)

• GBP/USD unchanged in Asia pending confirmation of Iran ceasefire extension

• Supported by buoyant risk appetite on Iran deal hopes, surging tech stocks

• Fed rate hike expectations, U.S. inflation concerns limit GBP upside

• Fed policymakers eye rate hike scenarios as AI debate deepens

• UK pledges 300,000 youth placements after 'lost generation' warning

• UK business sentiment edges up in May, Lloyds says

• Support 1.3400-05, 1.3370-75, resistance 1.3450-60, 1.3500-10

• Thursday range 1.3368-1.3450, Friday 1.3433-1.34485
Where U.S inflation is heading: choose your yardstick wisely:

(Krishna Kumar is a Reuters market analyst. The views expressed are his own.)

• EUR pairs for the most part better bid in pre-weekend Asia trading

• EUR/USD 1.1644-57 EBS in Asia after push up to 1.1661 yesterday

• To base of 1.1649-1.1702 daily Ichimoku cloud

• Still holding above now descending hourly Ichimoku cloud between 1.1628-35

• Large option expiries today to help contain spot action again

• 1.1595-1.1600 E1.7 bln, 1.1615-30 E1.2 bln, 1.1650-95 E3.4 bln

• Also between 1.1700-50 total E3.2 bln in expiries today

• EUR/JPY 185.51-64 EBS, around top of 185.21-52 hourly Ichimoku cloud

• In middle of now tapering daily Ichimoku cloud between 184.37-186.21

• Some option expiries today at 185.00 strike below

• EUR/GBP 0.8664-66 following push up to 0.8673 yesterday

• Still on hold below 0.8679 descending 100-DMA, 0.8684-0.8701 daily cloud

• Smattering of option expiries today on 0.87 handle

• EUR/CHF outlier and trading heavy, 0.9128-33 EBS, from 0.9170 high yesterday

• Towards base of 0.9123-88 daily Ichimoku cloud on pre-weekend haven flows?

• Related comments , , also
EUR/USD:


EUR/JPY:


EUR/CHF:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• AUD/USD flat Fri, activity subdued as markets weigh U.S.-Iran peace progress

• AUD recovery likely to fade into weekend, 0.7184 resistance looms large

• Agreement to extend Iran ceasefire awaiting Trump's approval, reports say

• Iran says no agreement has been reached; Strait of Hormuz remains in limbo

• RBA officials Bullock & Kent to appear before Senate Committee Wed

• Range Asia 0.7162-695, support 0.7080 0.6834, resistance 0.7184 0.7283
AUD Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• USD/JPY has seen little movement past 2 weeks, to around 159.00, just above

• Asia so far today 158.98-159.29 EBS, off from 159.65 high yesterday

• Japan FX intervention threat helping to limit the upside despite good demand

• View BOJ to hike in June also helping to keep lid on pair

• Demand good though - Japanese importers, foreign investor equity buy hedges

• Specs including Mrs Watanabes also have been buying dips, selling on rallies

• USD/JPY looks to remain relatively buoyant today as wont ahead of weekends

• Month-end flows largely seen done but some left-overs could affect action

• Option expiries supportive? 158.00-35 $1.4 bln, 158.40-159.00 $2 bln

• Smaller but also today 160.00 $762 mln, 161.00 $615 mln topside

• JGB-US Treasury 2-year interest rate differentials wider around 270 bps

• Differential in 10s up from recent lows around 181 bps

• This despite moves lower in US yields overnight, JGB yields easier too

• US yield decline in light of high inflation data surprising?

• Seems hopes of US-Iran deal trumping data, crude oil prices mixed

• Related comments , , also

• US markets , , ,

• On US data , on Fed , ,

• On US-Iran , , for more click on [FXBUZ]

USD/JPY:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• NZD/USD +1.4% from Thur 0.5865 low on Iran hopes & hawkish RBNZ comments

• RBNZ policy committee member Gourley expects OCR hike sooner than later

• NZ government budget passes down budget light on fiscal stimulus

• Sources claim U.S. & Iran agree to extend ceasefire, Trump's approval needed

• Iran refutes agreement, which supposedly includes easing Hormuz restrictions

• U.S. Apr core PCE +0.2% m/m (poll +0.3%), +3.3% y/y (poll +3.3%)

• NZD extends beyond recent 0.5888 top, looks bound for 0.5991 resistance zone

• Range NZ 0.59295-455, support 0.5815 0.5680, resistance 0.5991 0.6012
NZD Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• AUD/USD +0.9% from Thur 0.7098 low as risk sentiment improves on Iran hopes

• Sources say U.S.-Iran agreement to extend ceasefire awaits Trump's approval

• Iran denies agreement, which reportedly includes eased Hormuz restrictions

• AUD resistance near 0.7184 tough to break, drift lower likely in Asia

• U.S. Apr core PCE +0.2% m/m (poll +0.3%), +3.3% y/y (poll +3.3%)

• Overnight range 0.7108-70, support 0.7080 0.6834, resistance 0.7184 0.7283
AUD Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

Danske Research discusses EUR/GBP outlook and targets.

"EUR/GBP has been caught between two opposing forces with the poor risk sentiment putting upward pressure on the cross, amplified by an increasingly challenging political landscape in the UK with focus on leadership challenges within the Labour Party. On the other hand, while the UK is still a net-energy importer akin to the euro area, the energy mix in the UK slightly favours a relatively stronger GBP vs EUR. If ceasefire talks prove effective, we expect the focus to return to fundamentals," Danske notes.

"We highlight that the UK economy remains fragile and see scope for a larger reversal of Bank of England repricing than for the ECB, opening for a move higher in EUR/GBP. We forecast EUR/GBP to rise towards 0.89 on a 6–12-month horizon," Danske adds.

• GBP$ +0.12% at 1.3444 in NY afternoon trade; NorAm range 1.3390-1.3450

• US core PCE prc index m/m below f/c, sapping hawkish Fed expectations

• US and Iran reach deal but need Trump's final approval - Axios

• Peace, more dovish Fed rate view is GBP-friendly, though UK political, fiscal concerns linger

• GBP$ res 1.3450 Thursday high, 1.3477 the flat 100-DMA, 1.3509 daily high May 25

• Supt 1.3407 daily base line, 1.3368 Thursday low, 1.3304 daily low May 18

GBP Chart:


(Paul.Spirgel is a Reuters market analyst. The views expressed are his own)

• NY opened near 1.1605 after 1.1587 traded in Europe, pair rallied in early action

• USD, US yields slid, spreads tightened after PCE, claims reports

• Risk-on then dominated after report of a possible US-Iran ceasefire extension

• US yields turned lower, USD/CNH fell to 6.7710 and the USD was sold broadly

• Gold, silver and equities turned positive to reinforce the risk-on sentiment

• EUR/USD hit 1.1661 then dipped a bit, it traded up +0.23% late in the session

• Daily techs warn bears; RSIs diverged, trend line support held, bull hammer formed

• EUR/USD's rally above the 10- and 55-DMAs reinforces those bullish signs
eurusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

• NY opened near 0.7115 after 0.7098 traded in Europe's morning

• Pair rallied as USD, yields softened after PCE, jobless claims

• Rally intensified on report US-Iran might extend ceasefire for 60-days

• USD fell sharply, yields turned lower, USD/CNH hit a fresh 3-1/4- year low

• Gold , silver , stocks rallied to reinforce risk-on sentiment

• AUD/USD rallied above the 10-DMA, hit 0.7170, was up +0.34% in NY's afternoon

• Daily RSI diverged on today's low and a daily bull hammer candle formed
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)