The U.S. Dollar traded mixed on Friday after a series of softer-than-expected inflation reports strengthened expectations that the Federal Reserve will keep interest rates unchanged at its upcoming policy meeting. June Consumer Price Index (CPI) data slowed to 3.5% year-on-year, while Producer Price Index (PPI) data also surprised to the downside, reinforcing the view that inflationary pressures are gradually easing.

Following the inflation releases, investors reduced expectations for another near-term Fed rate hike, causing the Dollar Index to remain under pressure for the week. The euro held firm above 1.14 against the U.S. Dollar, while commodity-linked currencies such as the Australian Dollar also maintained recent gains as overall market risk sentiment improved.

Despite the softer inflation outlook, geopolitical tensions in the Middle East continue to limit downside pressure on the greenback. Ongoing disruptions around the Strait of Hormuz have kept oil prices elevated, raising concerns that higher energy costs could eventually slow the disinflation process and complicate the Federal Reserve's policy path.

From a technical perspective, traders are now shifting their focus toward upcoming U.S. housing data, consumer sentiment figures, and further comments from Federal Reserve officials for additional clues on monetary policy. Increased volatility is expected across major currency pairs as markets continue to balance improving inflation data against persistent geopolitical risks.