Economists widely anticipate that the European Central Bank will pause its interest rate hikes next week to assess the inflation situation, likely concluding its tightening cycle with a final increase in September.
A survey indicates that all respondents predict the ECB will leave borrowing costs unchanged this Thursday.
Most respondents expect policymakers to raise the deposit rate by 25 basis points to 2.5% in September, after reviewing the latest quarterly economic projections.
This level is generally seen by economists as the likely endpoint for the ECB's current cycle of monetary tightening, which began following a surge in oil prices due to conflict in Iran, triggering the most severe inflationary shock in the eurozone since 2023.
"We do not view a September rate hike as a certainty," stated HSBC economist Chris Hare, adding that progress in peace efforts and improvements in energy supply could potentially mean the ECB may not need to implement further increases.
Additionally, a drop in gasoline prices has helped lift US consumer confidence to its highest level in five months in early July.
However, consumer concerns about future inflation persist, with renewed tensions in the Middle East pushing energy prices higher and adding uncertainty to the future path of prices.
Preliminary data from the University of Michigan released on Friday showed the Consumer Sentiment Index rising to 54.4 in July from 49.5 in June, marking a five-month high and exceeding all economists' forecasts in a media survey.
The data reveals that falling gasoline prices from June through early July, which eased household cost pressures, were the primary driver behind the improvement in consumer confidence.
Nonetheless, as conflict in the Middle East has escalated again, pushing oil prices higher recently, market worries about future inflation prospects have intensified.
This survey was conducted between June 23 and July 13, with over 70% of responses collected before the US military strike on Iran in early July, meaning the results do not fully reflect the impact of recent geopolitical escalation.
Key data to watch today includes Germany's June PPI year-on-year, Canada's June unadjusted CPI year-on-year, and the US Conference Board's June Leading Indicator month-on-month.
US Dollar Index
The US Dollar Index consolidated with a slight gain on Friday, currently trading around 100.80.
Persistent safe-haven demand fueled by ongoing Middle East tensions continued to support the currency, alongside generally positive US economic data released during the session.
However, tempered expectations for further Federal Reserve interest rate hikes capped the index's upside potential.
Immediate resistance is seen near 101.30, with support around 100.30.
Euro/US Dollar
The euro traded within a narrow range, ending slightly lower on Friday and currently hovering around 1.1430.
The primary downward pressure came from a stronger US dollar, buoyed by safe-haven flows and robust US economic data.
Expectations for a potential ECB rate hike in September and positive economic data from the eurozone during the session limited the pair's losses.
Resistance is anticipated near 1.1500, with support around 1.1350.
British Pound/US Dollar
The British pound moved lower, closing with a modest decline on Friday and currently trading near 1.3450.
The main factors weighing on the pound were a stronger US dollar, supported by heightened market caution and favorable US economic data.
Recent positive UK economic data and easing concerns over domestic political uncertainty helped limit the currency's decline.
Key resistance is viewed near 1.3550, while support lies around 1.3350.
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