The US dollar softened slightly Monday as Treasury yields dropped 7-15 basis points, reflecting investor recalibration around easing inflation pressures and potential Fed rate cuts. Fed Governor Waller warned Trump's tariff policies risk pushing the Fed into rate cuts despite elevated inflation. The NY Fed's consumer survey highlighted rising short-term (3.8%) but easing long-term inflation expectations (2.9%), complicating the policy outlook.

Equities Rally as Tariff Relief Boosts Sentiment

U.S. stocks advanced, driven by temporary tariff exemptions on smartphones and computers. Financial shares surged, notably Goldman Sachs after robust earnings. President Trump hinted at further tariffs targeting pharmaceuticals and autos, highlighting Nvidia’s $500 billion U.S. investment in AI. However, former Treasury Secretary Yellen cautioned tariffs are damaging global trust in the U.S.

Euro Under Pressure Ahead of ECB Meeting

EUR/USD traded cautiously lower amid growth worries and German warnings of tariff-related industrial headwinds. Traders focus on Thursday’s ECB meeting, with expectations for a potentially volatile "hawkish" rate cut around resistance near 1.15. Technical support remains around 1.1144.

Sterling Gains Amid Bullish Sentiment

GBP/USD outperformed, driven by strong bullish positioning and elevated demand for upside options. Continued momentum hinges on breaking critical resistance at 1.3207 ahead of key UK inflation data due midweek.

Yen Strengthens as Risk Aversion Persists

USD/JPY maintained a defensive tone amid falling U.S. yields and sustained demand for protective options. Bears target key supports below 140, notably the 2024 low at 139.58, while a recovery above 144.55 could shift sentiment.

Commodity Currencies Gain; Gold Retreats

AUD and NZD rose strongly on improving risk sentiment and higher copper prices (+2.8%), amid optimism for Chinese stimulus. Oil prices stabilized despite cautious OPEC forecasts, while gold declined nearly 0.9% from recent highs. The S&P 500 climbed 1.45%, led by financials and real estate, balancing optimism with underlying risk caution.