The dollar rebounded strongly on Tuesday, supported by easing concerns over escalating U.S.-China trade tensions. Optimistic remarks by Treasury Secretary Scott Bessent, forecasting eventual tariff de-escalation despite challenging talks, boosted confidence. Incremental progress in U.S.-India discussions and meetings with 34 countries further lifted sentiment, propelling the dollar index higher as Treasury yields recovered modestly.

Euro Slips on Dollar Strength, ECB Caution

EUR/USD fell 0.78%, pressured by dollar gains, position adjustments, and month-end hedging. Interim support held at the 5-day moving average (1.1419), yet risks remain if the pair breaks below 1.1263. ECB President Lagarde stressed careful negotiations ahead for EU-U.S. trade deals, while policymaker Kazimir warned about lingering uncertainties despite nearing inflation targets. Reduced haven demand lifted EUR/CHF higher amid equity gains.

Sterling Ends Winning Streak, BoE Outlook Weighs

GBP/USD declined around 0.3%, ending its recent bullish run due to profit-taking and persistent dollar firmness. Risks increase if cable breaches support at 1.3266. BoE’s Megan Greene forecast subdued UK inflationary pressures from tariffs, focusing attention on Governor Bailey’s upcoming remarks for rate guidance.

Yen Recovers on Risk Sentiment, Trade Optimism

USD/JPY rebounded notably from recent lows, benefiting from improving equity markets and optimism over imminent U.S.-Japan trade negotiations. Technical levels near 141.62–64 and 142.05 remain key, with potential short-covering momentum above these points.

Stocks Rally, Commodities Mixed

U.S. equities surged; the S&P 500 gained 2.07%, led by financial stocks. Oil rose 1.78% on Iranian sanctions, while gold retreated 1.28% from recent highs. Copper jumped 3.28% amid improved global economic optimism.

Currencies at close: EUR/USD -0.78%, GBP/USD -0.3%, USD/JPY +0.62%, AUD/USD +0.47%, Dollar Index +0.65%.