Dollar Index Flat at 100.56 as Oil Jump Meets Cooling Yields

The Dollar Index closed Friday's session at 100.56, up a scant 0.04% — essentially flat, but the calm masks opposing forces. Earlier in the week softer US inflation data (June PPI fell and CPI posted a monthly decline) had curbed Fed-hike bets and pressured the dollar broadly. That eased by Friday as renewed Iran-related tension around the Strait of Hormuz — Kuwait said Iran struck a desalination/power plant — lifted oil prices and revived safe-haven dollar demand, pulling EUR/USD, GBP/USD, AUD/USD and USD/CHF lower on the day while USD/JPY ticked up 0.02%. The live 2026 policy question remains whether the Fed hikes from its 3.50-3.75% target, not whether it cuts.

US Treasury yields eased modestly in Friday's session: the 10-year fell 2.8bp to 4.541%, the 30-year fell 3.4bp to 5.064%, and the 5-year edged down 0.9bp to 4.273%. The 3-month bill ticked up 1.0bp to 3.707%, keeping the front end anchored near the Fed's 3.50-3.75% target range. The live 2026 policy question remains whether the Fed hikes further, not whether it cuts — consistent with reporting that the Fed held at 3.50-3.75% in June under new Chair Kevin Warsh, with nine of 18 officials' dot-plot projections showing a hike this year. The Fed is now in its quiet period ahead of the July 28-29 FOMC meeting, limiting fresh Fedspeak this week.

EUR/USD: 1.1438, -0.04% Friday, holding near its strongest level since June 19 in a quiet holding pattern ahead of Thursday's ECB decision. GBP/USD: 1.3451, -0.21%, giving back part of a mid-week rally that had taken cable to a two-month high near $1.354. USD/JPY: 162.40, +0.02%, little changed near its weakest level in roughly four decades, with Japan's markets shut Monday for the Marine Day holiday. USD/CAD: 1.4020, -0.15%, with the Canadian dollar supported by a narrowing CAD-US rate differential and the oil rally after the Bank of Canada held its policy rate at 2.25% on July 15.

Sterling eased 0.21% against the dollar in Friday's session, giving back part of a mid-week push to a two-month high near $1.354. Investing.com and exchangerates.org.uk pinned the pullback on a broadly firmer dollar — hawkish Fed expectations (the Fed held at 3.50-3.75% in June under new Chair Kevin Warsh, with nine of 18 officials' dot-plot projections showing a hike this year) plus a safe-haven bid tied to the escalating US-Iran conflict. Zoom out, though: Trading Economics shows GBP/USD up about 1.79% over the trailing month and 0.28% year-on-year, so Friday's dip reads as consolidation off the highs rather than a new downtrend. No major first-tier UK data is due Monday itself; the next tests are the ONS labour market overview Tuesday, UK CPI Wednesday, and flash PMIs and retail sales Friday, ahead of the BoE's July 30 rate decision.

Today's calendar: German PPI m/m at 16:00 (forecast -0.2%, previous 0.3%); Chinese FDI ytd/y at 16:02 (previous -8.6%); a heavy Canadian CPI slate at 22:30 — headline CPI m/m (forecast -0.2%, previous 1.0%), median CPI y/y (forecast 2.1%, previous 2.1%), trimmed CPI y/y (forecast 2.0%, previous 2.0%), common CPI y/y (forecast 2.5%, previous 2.7%) and core CPI m/m (previous 0.6%); US CB Leading Index m/m at 00:00 (forecast -0.1%, previous 0.1%); and New Zealand CPI q/q at 08:45 (forecast 1.5%, previous 0.9%). Japan's markets are shut for the Marine Day holiday, thinning JPY liquidity.