The dollar fell after President Donald Trump scrapped planned U.S. strikes on Iran, citing regionally backed talks with Tehran, allowing the euro to recover after an expected rate hike by European Central Bank. ECB policymakers see holding rates steady in July if energy prices stay near current levels, sources told Reuters, though they remain open to further tightening if inflation stays high. ECB President Christine Lagarde noted broadening of inflation throughout the economy, adding that risks to growth are to the downside. The dollar was initially supported by yield curve flattening after a hot PPI and renewed Middle East concerns following

Trump’s threat of a "hard" strike on Iran.

U.S. highlights on Friday include the University of Michigan report and SpaceX IPO. EUR/USD swung on U.S. data and wider spreads before rebounding with improved risk, but momentum remains mixed below key DMAs. Sterling gained on an improved risk tone after Trump scrapped Iran strikes, but remains rangebound with BoE hike expectations intact and support near 1.33. USD/JPY held in a range above 160 as softer yields and positioning limit the upside, while rising moving averages and nearby Tenkan sen at 159.95 lend support. AUD/USD bounced from early losses to reclaim its lower Bollinger band alongside metals and equities, with improving technicals pointing to a cautiously bullish bias. USD/CAD briefly topped 1.40 after Canada’s trade minister Dominic LeBlanc said bilateral deals with the U.S. will accompany a review of the trilateral pact.

Treasury yields fell 6 to 8 basis points. The 2s-10s curve slipped about 1 basis point to +38.9bp.

The S&P 500 rose 1.5%.

WTI oil slid just over 2%

Gold rose 2.3% while copper gained 1.7%

Heading toward the close: EUR/USD +0.3%, USD/JPY -0.32%, GBP/USD +0.35%, AUD/USD +0.62%, DXY -0.2%, EUR/JPY -0.08%, GBP/JPY -0.03%, AUD/JPY +0.14%.(Editing by Burton Frierson Reporting by Robert Fullem)