Financial markets ended the week cautiously as investors assessed reports of progress in negotiations between the United States and Iran.

Market highlights:

• The U.S. dollar weakened against the euro and pound but strengthened versus the yen. • The European Central Bank indicated that its recent rate increase may be sufficient for now, depending on inflation trends. • The Bank of England is expected to maintain current policy settings amid stable economic data. • Markets are closely watching the upcoming Bank of Japan meeting, where a rate hike remains possible. • Australia’s slowing growth and rising unemployment are supporting expectations of a pause in monetary tightening.

Meanwhile, oil prices drifted lower toward $86 per barrel as hopes for a diplomatic breakthrough reduced concerns about prolonged disruptions in the Strait of Hormuz.

Currency markets remain driven by inflation expectations, monetary policy, and geopolitical developments.

Key highlights:

United States • PCE inflation accelerated to 4.1% • Core PCE increased to 3.4% • GDP expanded by 2.1% • Markets continue pricing in a high probability of further Federal Reserve tightening later this year.

Eurozone Consumer inflation expectations eased modestly, supporting the euro despite remaining above historical averages.

United Kingdom Attention now shifts to upcoming GDP figures and potential political developments that may influence fiscal policy expectations.

Japan Tokyo inflation remains below the Bank of Japan’s target, reducing immediate pressure for additional monetary tightening.

Australia Investors await the latest RBA meeting minutes for further guidance on interest-rate policy.

Energy Markets Oil prices continue to weaken amid improving prospects for a U.S.–Iran agreement and growing questions surrounding future OPEC production policy.

Currency markets remain primarily driven by central bank expectations.

Key developments include:

• The US dollar strengthened against the euro and yen despite weaker housing market data. • Treasury Secretary Scott Bessent cautioned investors against overinterpreting Federal Reserve dot plot projections. • Germany’s consumer confidence improved only marginally, while ECB officials maintained a cautious inflation outlook. • UK retail activity weakened further, reflecting slowing domestic demand. • The Bank of Japan continued to signal additional monetary tightening as inflation remains above target. • Australia’s stronger employment report reinforced expectations of further Reserve Bank tightening.

Meanwhile, oil prices remained range-bound as progress in US-Iran negotiations offset the bullish impact of declining US crude inventories.

Monetary policy expectations continue to dominate global FX markets.