Dollar Holds Weekly Losses as Trump Signals Possible Iran Deal and Inflation Pressures Persist

The US dollar traded near 99.8 on Friday, retaining most of the losses recorded in the previous session as easing geopolitical tensions reduced demand for traditional safe-haven assets.

Investor sentiment improved after President Donald Trump stated that a peace agreement with Iran could be finalized as early as this weekend during diplomatic meetings in Europe. The comments triggered a sharp decline in oil prices, helping to alleviate concerns that elevated energy costs could further fuel inflationary pressures worldwide.

Lower crude prices provided some relief to financial markets, which have been closely monitoring the economic consequences of the ongoing Middle East conflict. Energy costs have remained a key factor influencing inflation expectations and central bank policy decisions throughout the year.

Despite the easing in geopolitical risk, inflation data released on Thursday underscored persistent price pressures in the US economy. The Producer Price Index (PPI) rose 6.5% year-over-year in May, marking its highest level since November 2022 and slightly exceeding market expectations of 6.4%.

The latest figures suggest that higher energy costs linked to regional instability continue to filter through supply chains and production costs. The report followed earlier data showing consumer inflation accelerated to its highest level in three years, reinforcing concerns that inflation remains above the Federal Reserve’s long-term target.

The latest inflation reports reinforced the view that price pressures remain elevated despite signs of easing geopolitical tensions. With both consumer and producer prices accelerating, traders continue to assess whether the Federal Reserve will have sufficient room to ease policy later this year or whether inflation risks will keep interest rates higher for longer.

Market attention now turns to developments in US-Iran negotiations, movements in energy markets, and upcoming economic releases that could shape expectations for the Fed’s next policy moves.