Euro gains modestly against US Dollar as Trump calms conflict fears

• The euro remains modestly bid against the US Dollar on Friday, amid a softer Greenback and calmer risk tone.
• US President Trump's cautious stance on the Israel-Iran conflict reduces fears of immediate escalation, weighing on safe-haven flows.
• The EUR/USD holds near 1.1510, slightly below the intraday high of 1.1535, while the DXY slips back under 99.00.

The Euro (EUR)edges up modestly against the US Dollar (USD) on Friday, capitalizing on a softer Greenback as traders digest a cautious geopolitical signal from the White House. US President Donald Trump's plan to decide within two weeks on possible US involvement in the Israel-Iran air conflict has calmed immediate fears of swift military action, slightly boosting risk appetite.

The EUR/USD pair remains near 1.1510 in a range-bound market on Friday, slipping slightly from the session high of 1.1535. At the same time, the US Dollar Index (DXY) remains under mild pressure, drifting back below the 99.00 handle to trade near 98.75, with sentiment subdued as markets stay on edge over possible US involvement in the Israel-Iran conflict.

The Philadelphia Fed Manufacturing Index held steady at -4.0 in June 2025, unchanged from May and missing market expectations of a milder decline to -1. The reading underscores that manufacturing activity in the region remains sluggish, weighed down by softening demand and early signs of cooling labor market conditions

The ongoing Middle East conflict continues to roil global markets, driving Crude oil prices sharply higher and raising concerns about renewed inflationary pressures in the Eurozone. Notably, Eurozone headline inflation slipped to 1.9% in May from 2.2% in April, marking its first decline below the ECB's 2% target in several months.

The European Central Bank (ECB) cut its key interest rate for the eighth time earlier this week and signaled it is approaching the end of its easing cycle. Speaking in Italy, ECB Governing Council member François Villeroy de Galhau noted that, barring a major external shock -- including any fresh military escalation in the Middle East -- monetary policy could still lean further toward accommodation over the next six months. He also pointed out that the euro's recent strength against the US dollar should help cushion some of the inflationary impact from elevated oil prices.

On the US front, the Federal Reserve (Fed) kept its benchmark interest rate unchanged at 4.25%-4.50% for the fourth straight meeting earlier this week, sticking to its wait-and-see approach as policymakers weigh persistent inflation risks against signs of moderating economic momentum. Recent data showed headline inflation edging up slightly to 2.4% in May from 2.3% in April, while core inflation held steady near 2.8%, still above the Fed's comfort zone.

While markets still expect the Fed to deliver two rate cuts this year, Chair Jerome Powell cautioned that renewed cost pressures from tariffs or fresh Middle East tensions could complicate the path to easing. Despite this policy divergence, the Euro remains on the front foot for now, supported by ongoing tariff uncertainties.