The US dollar strengthened modestly on Tuesday, benefiting from stable equities after upbeat bank earnings, easing inflation concerns, and selective tariff relief from the White House. Treasury yields softened slightly on stable March import and export prices, prompting cautious market positioning ahead of Wednesday’s U.S. retail sales and remarks by Fed Chair Jerome Powell. Atlanta Fed’s Bostic highlighted tariff-induced uncertainty, urging stable Fed policy.

Canadian Dollar Weakens on Rate Cut Bets

The Canadian dollar weakened notably after CPI data unexpectedly softened to 2.3%, increasing odds of a Bank of Canada rate cut to 50%. Canada also introduced targeted measures supporting automakers amid trade uncertainty.

Euro Retreats as German Sentiment Plunges

EUR/USD retreated sharply from recent highs near 1.15 as German investor confidence saw its steepest drop since 2022. One-month volatility declined ahead of Thursday’s anticipated ECB rate cut. Technical supports lie near 1.1241 and 1.1213.

Sterling Outperforms; Approaches Key Resistance

GBP/USD surged to a six-month high at 1.3252, driven by strong UK banking and defense sector performance, boosting the FTSE by 1.4%. Traders cautiously await Wednesday’s crucial UK inflation data. EUR/GBP corrected lower, targeting support at 0.8449.

Yen Rangebound Ahead of Powell, US-Japan Talks

USD/JPY traded narrowly ahead of Fed Chair Powell’s speech and key trade talks between the U.S. and Japan. Technical signals suggest limited upside potential, with significant bearish pressure if 142.05 breaks decisively.

Equities Mixed; Commodity Markets Cautious

U.S. equities ended flat, reflecting investor hesitation. Treasury yields fell up to 5 basis points, slightly flattening the curve. Oil prices edged lower (-0.16%) on IEA’s cautious demand outlook. Gold rose modestly (+0.61%), benefiting from continued trade uncertainties. Copper remained flat, awaiting potential Chinese stimulus.

Currencies at close: EUR/USD -0.63%, USD/JPY +0.02%, GBP/USD +0.28%, AUD/USD +0.33%, Dollar Index +0.55%.