Currency markets trade mixed amid US-Iran conflict uncertainty

Financial markets remained volatile heading into the weekend as investors avoided taking large positions amid continued uncertainty surrounding the conflict involving Iran and the United States.

Market participants largely stayed on the sidelines, limiting major moves across asset classes.

The June labor market report from Canada is expected to be the day's only major economic release with the potential to drive market sentiment during the second half of the session.

Meanwhile, the US Dollar (USD) struggled to maintain momentum after posting modest losses on Thursday.

In the absence of high-impact US economic data, improving risk appetite weighed on the greenback.

The positive tone in equity markets, reflected by gains in Wall Street's major indexes, reduced demand for the safe-haven currency.

Early on Friday, US stock index futures traded mixed, while the US Dollar Index remained under pressure, hovering around 100.75.

Euro and Pound extend gains

The euro maintained its strength against the US dollar during early Friday trading.

EUR/USD edged higher toward the 1.1450 level after data from Germany confirmed that the country's annual Consumer Price Index (CPI) increased 2.3% year-over-year in June.

The reading matched the preliminary estimate, providing little surprise for markets.

The British pound also continued its recent advance.

GBP/USD extended its weekly gains and traded above the 1.3400 mark, reaching its highest level since the middle of June.

Canadian dollar awaits employment data

The Canadian dollar strengthened against its US counterpart ahead of the country's June labor market report.

USD/CAD remained under pressure during the European session, falling toward 1.4150.

Market expectations point to Canada's unemployment rate holding steady at 6.6% in June.

The employment report is expected to be closely watched as it could influence expectations for the Canadian economy and prompt fresh movement in the currency pair.

Strong Japanese inflation data supports the yen

Earlier on Friday, data from Japan showed that the country's Producer Price Index (PPI) rose 7.1% year-over-year in June.

The latest reading accelerated from the 6.6% increase recorded in May and exceeded market expectations of 6.8%.

Japan's Finance Minister, Satsuki Katayama, said the government will closely monitor economic indicators and financial market conditions.

Following the stronger-than-expected inflation data, USD/JPY remained under bearish pressure, declining about 0.5% on the day to trade near 161.60.

Indian rupee strengthens despite oil price concerns

The Indian rupee extended Thursday's recovery against the US dollar during Friday's opening session.

USD/INR fell further toward 95.22 as the US dollar weakened amid hopes that renewed conflict in the Middle East between the United States and Iran would not become prolonged.

However, the rupee could still face pressure if elevated oil prices persist, as higher energy costs remain a potential headwind for the Indian currency.