The US Dollar trades slightly lower on Wednesday as markets remain cautious amid escalating tensions surrounding Iran and the Strait of Hormuz. The US Dollar Index (DXY) slips toward 101.10, helping the Euro recover modestly, while most other major currency pairs remain relatively stable.

Risk sentiment remains fragile after US President Donald Trump warned that Washington could strike Iranian infrastructure if Iran attacks another ship in the Strait of Hormuz. Concerns about a wider conflict and possible disruptions to global energy supplies are supporting oil and precious metals.

DXY falls slightly toward 101.13 as investors prepare for Thursday’s US Initial Jobless Claims. Claims are expected to rise to 212K from 208K, although the figures would still suggest that layoffs remain limited.

EUR/USD advances toward the 1.1410 area as the Greenback loses modest ground. Investors remain cautious ahead of the European Central Bank’s monetary policy decision. The ECB is expected to leave the Main Refinancing Operations Rate at 2.40% and the Deposit Facility Rate at 2.25%. President Christine Lagarde’s press conference will be closely watched for signals about future policy changes.

GBP/USD trades marginally lower near 1.3380 despite the softer US Dollar. The pair lacks a strong domestic catalyst ahead of the UK GfK Consumer Confidence report, which is expected to improve to -21 in July from -23.

USD/JPY remains virtually unchanged near 163.15, holding close to multi-decade highs. Rising oil prices continue to represent a challenge for Japan, a major energy importer, while geopolitical uncertainty supports demand for the US Dollar. Japan’s upcoming inflation report could influence expectations surrounding further Bank of Japan policy tightening.

AUD/USD edges lower toward 0.6995 as traders avoid taking large positions ahead of Australia’s June labor-market report. Employment is expected to increase by 15K after rising by 40.3K in May. The Unemployment Rate and Participation Rate are forecast to remain unchanged at 4.4% and 66.7%, respectively.

USD/CAD declines toward 1.4090 as the Canadian Dollar benefits from higher oil prices. Canadian Retail Sales are expected to rise 1.0% MoM in May, accelerating from 0.5%, while sales excluding automobiles are forecast to increase 1.4% after a 0.1% gain.

West Texas Intermediate (WTI) Oil rallies above $86.40 per barrel, gaining more than 2% as concerns about the security of energy shipments through the Strait of Hormuz intensify.

Gold climbs toward $4,135, advancing more than 1% as geopolitical uncertainty increases demand for traditional safe-haven assets.

Thursday’s preview

Australia’s employment report will begin a busy session, followed by the ECB interest-rate decision and Lagarde’s press conference. Markets will also monitor Canadian Retail Sales, US Initial Jobless Claims and Eurozone Consumer Confidence.

Later in the session, Australia’s preliminary July PMIs, UK Consumer Confidence and Japan’s June CPI report will be released. Japanese core inflation excluding fresh food is expected to accelerate to 1.6% YoY from 1.4%.