Euro flatlines amid mixed German data with all eyes on US Nonfarm Payrolls

• EUR/USD trades flat around the 1.1520 area after pulling back from highs near 1.1560
• German Industrial Production increased in June, but the trade surplus narrowed beyond expectations.
• The US Dollar ticks up on hopes of Fed tightening and doubts about an upcoming peace deal in Iran

The Euro (EUR) is trading flat around 1.1520 against the US Dollar (USD) on Friday, following a mild pullback from three-week highs at 1.1560 and on track for a minor weekly decline. The US Dollar is showing a moderately stronger tone although investors remain wary of placing large directional bets, awaiting the release of July's Nonfarm Payrolls (NFP) report, due later on the day.

Data released by the German Federal Office of Statistics on Friday revealed that Industrial Production rose 0.2% in June, down from May's 0.7% increase, but above the 0.1% market consensus. At the same time, German Trade Balance data showed that June's surplus narrowed to EUR 15.4 billion from an upwardly revised EUR 19.4 billion surplus in May, well beyond the EUR 17.4 billion surplus expected by the market.

Hopes of a swift peace deal fade

The safe-haven US Dollar is drawing support from growing doubts about a peace deal in Iran and the reopening of the Strait of Hormuz. Iranian Fars news agency reported on Thursday that Tehran would be considering a plan to ban Israeli and US vessels from the Strait, an idea which collides with the US will to keep the waterway free of tolls or restrictions of any sort,

Apart from that, the Financial Times, citing sources close to the US Federal Reserve, reported that Chairman Kevin Warsh is ready to hike interest rates as soon as September, if inflation remains persistently high, which provided additional support to the Greenback

This news heightens investors’ interest in Friday’s Nonfarm Payrolls report. Analysts at TD Securities, however, see the risks skewed to the downside. The bank argues that “both the monthly and weekly ADP data have moderated this summer after a strong start to the year,” and they anticipate that “a similar trend is likely to occur with NFP job gains.”