Mega-Cap Earnings Shift to Alphabet and Tesla Next Week

EUR/USD trades little changed around 1.1445 during Friday's early European session as investors assess escalating geopolitical tensions in the Middle East while awaiting the preliminary University of Michigan Consumer Sentiment Index for July later in the day.

According to Reuters, Iran has instructed Yemen's Houthi movement to prepare to close the Red Sea oil route if the United States attacks Iranian power infrastructure, raising fresh concerns over global energy supplies. Separately, Iran's Tasnim news agency reported explosions in Bandar Abbas, Qeshm, and Ahvaz, while loud blasts were also reported in Kuwait and Basra, highlighting the worsening regional security environment.

On the European side, the European Central Bank is widely expected to leave interest rates unchanged at next week's policy meeting. However, the recent surge in energy prices has strengthened market expectations that policymakers could deliver a second rate hike of the year in September as inflation risks intensify.

Meanwhile, Federal Reserve Governor Lisa Cook maintained a cautiously hawkish stance, stressing that one month of softer inflation data is insufficient to establish a lasting disinflation trend. She described monetary policy as only "mildly restrictive" and reiterated that the Fed can afford to wait for additional evidence before adjusting rates while remaining prepared to act if inflation progress stalls.

Gold struggles to build on a modest rebound above the $4,000 mark during Friday's European session, slipping back toward the lower end of its daily range. The precious metal remains pinned near its lowest level in a month as rising inflation concerns and expectations of tighter Federal Reserve policy continue to underpin the US Dollar, weighing on the non-yielding asset.

The conflict has intensified in recent days, with Iranian officials reporting strikes on civilian infrastructure in Bandar Abbas, including power facilities and a train station. Iran has responded with missile and drone attacks targeting US-allied Gulf nations, while tensions have also increased around the Strait of Hormuz.

Recent US economic data has further strengthened the case for higher interest rates. Initial Jobless Claims fell to 208,000 in the week ended July 11, signaling continued resilience in the labor market. Meanwhile, the Philadelphia Fed Manufacturing Index jumped to 41.4 in July, its highest reading since November 2021, with survey details pointing to persistent price pressures.

Federal Reserve officials have also maintained a hawkish tone. Dallas Fed President Lorie Logan argued that recent improvements in inflation data remain insufficient and suggested that modestly higher interest rates may still be necessary. Fed Vice Chair Philip Jefferson similarly said he would support additional policy tightening if inflation fails to improve in the near term.

Market participants now turn their attention to Friday's US economic calendar, which includes Building Permits, Housing Starts, Industrial Production, and the preliminary University of Michigan Consumer Sentiment and Inflation Expectations reports. The data, along with additional comments from Federal Reserve officials, could influence the US Dollar's direction and determine whether Gold extends its decline for a second consecutive week.

Oil prices remained elevated early on Friday as escalating hostilities between the United States and Iran heightened concerns over global crude supplies, with renewed threats to both the Strait of Hormuz and the Red Sea supporting the latest rally.

Market sentiment remained dominated by geopolitical risks after the United States intensified its military campaign against Iran, launching two major waves of airstrikes on Wednesday and continuing operations on Thursday. According to the US Central Command, the latest strikes were aimed at further degrading Iran's military capabilities.

Iran has responded with missile and drone attacks targeting US military assets across the region. Qatar's Defence Ministry said its forces intercepted an Iranian missile attack early Friday, while authorities reported that a child was injured by shrapnel resulting from the interception.

Supply concerns deepened after Reuters reported that Iran had instructed Yemen's Houthi movement to prepare to close the Red Sea oil route if the United States targets Iranian power infrastructure. The prospect of disruptions to both the Strait of Hormuz and the Red Sea—two of the world's most important energy shipping corridors—has significantly increased the geopolitical risk premium embedded in oil prices.

US stocks closed lower on Thursday, led by losses in technology shares as semiconductor stocks retreated despite strong earnings from Taiwan Semiconductor Manufacturing Co. Investor sentiment was also weighed down by renewed expectations of tighter Federal Reserve policy after Dallas Fed President Lorie Logan signaled support for higher interest rates.

TSMC reported a 77% year-over-year increase in quarterly net profit to T$706.6 billion ($22 billion), comfortably exceeding market expectations. As the world's largest contract chipmaker and a key supplier to Nvidia and Apple, the results reinforced the strength of artificial intelligence-related demand, with Chief Executive C.C. Wei indicating that robust AI-driven growth could continue through the end of the decade. Despite the strong earnings, TSMC's US-listed shares fell 2.3% as investors focused on the company's aggressive spending plans.

Attention is now shifting to the next wave of technology earnings, with results due from Alphabet, Intel, IBM, Texas Instruments, and Tesla next week, followed by Microsoft, Meta, Amazon, Qualcomm, Arm, and Apple. Investors will closely monitor capital expenditure plans and AI-related investments to assess whether elevated valuations remain justified.

Economic data released on Thursday pointed to continued resilience in the US economy. Retail sales rose 0.2% in June, matching expectations, while initial jobless claims fell to 208,000 in the week ended July 11, underscoring the strength of the labor market. The economic backdrop, combined with hawkish comments from Federal Reserve officials, reinforced expectations that interest rates could remain elevated for longer.

The combination of resilient economic data, persistent inflation concerns, and cautious Fed commentary prompted investors to trim exposure to high-growth technology stocks, even as corporate earnings continued to highlight strong demand for artificial intelligence infrastructure.