The US dollar strengthened sharply on Wednesday, reaching a three-week peak as easing trade tensions and reassurances from President Trump on Fed Chair Powell's position boosted investor confidence. Treasury Secretary Bessent affirmed a strong-dollar policy and hinted tariffs on China might be reduced to 50-65%, contingent on negotiations, underpinning market optimism.

EUR/USD Falls on ECB Caution, Weak Data

EUR/USD declined notably after dovish comments from ECB’s Lagarde and Knot, who cautioned about inflation risks amid persistent tariff uncertainty. Weak Eurozone business data further pressured the euro. Technically, EUR/USD breaking below its 5-day moving average at 1.14 signals further downside toward support at 1.1264 and 1.1241.

Sterling Retreats as BoE Remains Cautious

GBP/USD slipped under broad dollar strength and cautious statements from BoE Governor Bailey regarding economic risks from trade disruptions. UK finance minister Reeves signaled Britain would not rush into a comprehensive U.S. trade deal. GBP/USD found interim support near 1.3207, indicating potential stabilization between 1.30-1.34.

USD/JPY Climbs on Improved Risk Sentiment

USD/JPY advanced strongly due to rising equities, short-covering, and assurances from Bessent that currency levels were not part of U.S.-Japan trade talks. Technicals indicate further short-term upside, though bearish caution remains evident in options markets.

Equities Rally, Commodities Weaken

U.S. equities rose significantly, with the S&P 500 gaining 1.61%, driven by tech sector strength. Commodities weakened amid dollar strength; oil prices fell 2.3% on possible OPEC+ output hikes, gold dropped 2.68%, and copper declined moderately by 0.74%.

Currencies at close: EUR/USD -0.83%, USD/JPY +1.16%, GBP/USD -0.50%, AUD/USD -0.05%, Dollar Index +0.76%.