The dollar traded mixed on Tuesday, supported by rising Treasury yields following the announcement of U.S. metal tariffs. Fed Chair Jerome Powell reinforced expectations that rate cuts remain on hold, citing strong economic conditions and inflation still above the 2% target. Cleveland Fed President Beth Hammack echoed this, signaling monetary policy stability for now.

Euro Gains as European Stocks Hit Record Highs

The euro climbed 0.39%, helped by rising European stocks despite ongoing U.S.-EU trade tensions. EC President Ursula von der Leyen reaffirmed the EU’s commitment to balanced trade but warned of potential countermeasures against tariffs.

Sterling Rises on Hawkish BOE Signals

GBP/USD gained 0.51%, breaking above its 21-DMA at 1.2360, as BOE’s Catherine Mann clarified that her 50bp rate cut vote does not signal a full easing cycle. U.K. equity optimism provided further support.

Yen Weakens as Treasury Yields Climb

USD/JPY rose 0.30%, with yen crosses gaining as higher U.S. yields triggered short-covering. Traders remain cautious ahead of CPI data, with potential for another round of USD/JPY buying if inflation surprises to the upside.

Commodities React to Tariff Uncertainty

• Oil: Gained 1.3% on supply concerns linked to new sanctions.
• Gold: Eased 0.05%, pressured by dollar firmness.
• Copper: Dropped 2.46%, as traders feared tariffs could hurt industrial demand.

Equities and Yields Reflect Pre-CPI Caution

• Treasury Yields: Rose 2-4 bps, with the 2s-10s curve steepening to +24.0bp.
• S&P 500: Gained 0.07%, with mixed sector performance ahead of inflation data.

Market Outlook: Focus on CPI and U.S. Trade Policy

Markets position for volatility ahead of the U.S. inflation report, which could influence Fed rate expectations. The dollar’s direction hinges on trade developments, while yen, euro, and sterling remain sensitive to monetary policy shifts and geopolitical risks.