USD/PKR and USD/IRR in Focus as Trump Cancels Iran-Pakistan Talks

The US dollar is positioned for potential volatility against emerging market currencies after President Trump abruptly cancelled a diplomatic mission to Pakistan for Iran negotiations. Trump's decision to pull envoys Steve Witkoff and Jared Kushner from the planned trip, citing unproductive prospects, signals a hardening of the US stance in the ongoing Iranian conflict. The cancellation suggests prolonged geopolitical uncertainty in the Middle East and South Asia, which typically supports safe-haven flows into the US dollar, Japanese yen, and Swiss franc. Oil prices have already been climbing on the back of unresolved tensions, adding inflationary pressure that could influence Federal Reserve policy expectations. For forex traders, the breakdown in diplomatic channels increases risk-off sentiment, potentially strengthening USD against risk-sensitive currencies such as PKR, TRY, and ZAR while supporting USD/JPY downside as yen demand rises. Key pairs to monitor include USD/JPY near-term support around current levels and EUR/USD, which may face pressure if safe-haven dollar buying intensifies. Traders should watch for further escalation rhetoric over the weekend.