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)