ForexLive European FX news wrap: Dollar gains as Israel and Iran tensions run high

Headlines:

• Trump: Iran must make a deal before there is nothing left
• Iran pulls out of nuclear talks planned for Sunday
• Iran's legitimate and powerful response will make Israel regret its foolish act
• Why it's hard to see Iran starting a full-fledged war against Israel
• Israel is prepared for the possibility of a full-fledged war with Iran - TASS
• Iraq affirms that gas supply flows from Iran were not affected by Israel strikes overnight
• Iran confirms key military casualties, says Israel has crossed all red lines
• Japan expects a trade deal with the US to spare it from higher auto tariffs - BBG
• Japan prime minister Ishiba is reportedly to hold phone call with US president Trump today
• Eurozone April industrial production -2.4% vs -1.7% m/m expected
• Eurozone April trade balance €9.9 billion vs €36.8 billion prior
• Germany May wholesale price index -0.3% vs -0.1% m/m prior
• Germany May final CPI +2.1% vs +2.1% y/y prelim
• Spain May final CPI +2.0% vs +1.9% y/y prelim
• France May final CPI +0.7% vs +0.7% y/y prelim
• China May M2 money supply +7.9% vs +8.1% y/y expected

Markets:

• USD leads, NZD lags on the day
• European equities lower; S&P 500 futures down 1.0%
• US 10-year yields flat at 4.360%
• Gold up 1.1% to $3,419.80
• WTI crude up 5.9% to $72.91
• Bitcoin down 1.0% to $104,898

All eyes are on the Middle East as tensions remain high after Israel's overnight strikes across Iran. The attacks killed numerous key Iranian military officials and now we're about to see what the response will be from Iran. Israel has reaffirmed that they will keep up the aggression with Trump even applauding the move. The US president said the attack was "excellent" and that "there's more to come, a lot more".

In markets, it's all about risk-off sentiment dominating the theme. As tensions escalate, oil is staying more bid but off earlier highs on the day. WTI crude is still up nearly 6% just under $73. Meanwhile, gold is bid by about 1% as it holds a push above $3,400 to its highest levels since early May.

In FX, the dollar managed to find back its traditional roots as a haven currency - a rather rare occasion since Trump's tariffs war started. The greenback is bid across the board with EUR/USD falling back to 1.1500, down 0.7% on the day. Meanwhile, USD/JPY also nudged higher as it climbs up by 0.6% to 144.30 and USD/CHF is also up 0.4% to 0.8135 on the day.

The aussie and kiwi are the two laggards amid the more defensive risk mood with AUD/USD down 0.8% to 0.6480 and NZD/USD down 1.0% to 0.6010 currently.

In the equities space, it's all red across the board with European indices down over 1% mostly while S&P 500 futures are also down thereabouts as we look towards US trading. In the bond market, yields were looking heavy at the start of the session but have clawed their way back up to be little changed on the day. 10-year yields in the US were down to around 4.32% earlier but are now back up to 4.36%.

Let's see what the next chapter of the battle will bring before the weekend.