The dollar index edged higher Friday as markets grew anxious over next week's U.S. tariff implementation. A tense exchange between Presidents Trump and Zelenskiy diminished hopes of a Ukraine peace deal, driving safe-haven flows into the greenback.

Euro Hits Two-Week Low Amid Geopolitical Worries

EUR/USD fell 0.2% to its lowest in two weeks, pressured by rising EU-U.S. tariff concerns and expectations of an ECB rate cut. Key support at 1.03 is now in focus, with resistance at the 21-day moving average near 1.0417 likely to limit short-term gains.

Treasury Yields Decline as Inflation Eases

Treasury yields dropped after U.S. core PCE inflation moderated slightly to 2.5%, below expectations. The 2-year yield fell below 4%, while the 2s-10s yield curve steepened modestly to +12.3bps. Cleveland Fed's Hammack reiterated caution on interest rate hikes despite persistent inflation.

Sterling Weakens, Awaiting PMI Data

GBP/USD slid 0.2%, testing support at the 21-day moving average around 1.2541. Limited market positioning suggests muted downside risk ahead of UK PMI data. BoE’s Ramsden highlighted persistent inflation risks but maintained a measured approach to rate policy.

Yen Vulnerable as USD/JPY Approaches 151

USD/JPY advanced toward 151 before retreating as Treasury yields softened. The yen remains sensitive to short-covering moves. Traders await Japan’s PMI and speeches by BoJ’s Ueda and Finance Minister Kato next week, with strong resistance near 152.

Equities and Commodities Softer Amid Risk-Off Tone

The S&P 500 dipped 0.13%, pressured by tech weakness. Commodities broadly weakened: gold fell 1.07%, copper declined 1.38%, and oil ended marginally lower (-0.14%), reflecting heightened caution ahead of potential geopolitical escalations.