Markets Today: UK PMI beats as input costs soar, DXY advances & Gold grinds lower. US PMI & Middle East tensions in focus

The Greenback is on track for its first weekly gain in a month this Thursday as geopolitical risk premia return to the forefront. A deepening standoff between Iran and the US, coupled with a distinct lack of progress on the diplomatic front, has pushed oil prices back above the psychological $100 a barrel mark, weighing heavily on broader market sentiment.

At this stage, the two sides remain fundamentally at odds over key sticking points, including the current blockades, nuclear concerns, and control of the Strait. With the waterway effectively remaining under threat, the resulting energy shock continues to ripple through global markets, posing a significant headwind for global economic growth.

The US Dollar Index (DXY), which measures the Greenback against a basket of six major peers, edged higher to trade around the 98.60 mark. This puts the index on track for a weekly gain of 0.4%, marking its first positive weekly performance in a month.

While the Dollar served as the primary safe-haven beneficiary when the conflict first erupted in March, optimism surrounding a potential ceasefire and peace deal earlier this month saw a rotation back into risk-sensitive currencies.

However, that relief rally appears to be fizzling out.

Major Currencies Under Pressure

• EUR/USD: The Euro remained largely flat at $1.17, having earlier hit its softest levels since mid-April. The single currency is bracing for a 0.5% weekly decline, snapping a three-week winning streak.
• GBP/USD: Cable slipped 0.1% to trade at $1.3484. Sterling bulls seemed unfazed by data indicating that the US-Israeli conflict with Iran is already weighing on UK consumer sentiment, particularly as households scale back on fuel expenditure.
• USD/JPY: The Yen weakened slightly to 159.56, hovering dangerously close to the 160.00 handle, a level many participants view as the “line in the sand” for potential BoJ intervention.

Meanwhile, interest rate markets are currently pricing in a modest 25% probability of a Fed cut before year-end, contrasting sharply with the ECB, where traders are factoring in two potential hikes for 2026.

Currency Power Balance