The dollar index fell for a fourth straight session, pressured by slumping Treasury yields and weak U.S. retail sales data, which showed the biggest drop in nearly two years. This fueled concerns over U.S. growth sustainability, reinforcing expectations of Fed rate cuts. Easing tariff concerns and Ukraine peace talks optimism further weighed on the greenback, as Ukrainian President Volodymyr Zelenskiy signaled willingness for direct discussions with Vladimir Putin after consultations with Donald Trump and European leaders.

Euro and Pound Rally as Sentiment Shifts

• EUR/USD: Climbed 0.35% to 1.0514, driven by Ukraine peace optimism, though 1.05 expiries and Bollinger Band resistance capped gains.
• GBP/USD: Hit a year-to-date high of 1.2631, supported by momentum ahead of key U.K. data releases next week.
• USD/CHF: Slipped below its 55-day moving average, marking a new year-to-date low at 0.8969, as investors moved away from the dollar.

Yen Firms as Yields Drop; USD/JPY Holds Above Key Levels

USD/JPY fell 0.30%, pressured by lower Treasury yields, but found support near 152.00, where large options positions are concentrated. Resistance is noted at 153.35 (100-DMA) and 154.16 (21-DMA).

Commodities React to Changing Market Sentiment

• Oil: WTI crude slipped 0.70%, amid speculation that Ukraine peace talks could boost global supply.
• Gold: Dropped 1.56% as traders took profits following its recent rally.
• Copper: Flat, reflecting balanced supply-demand dynamics.

Equities and Bond Markets Reflect Mixed Sentiment

• S&P 500: Gained 0.10%, as lower yields offered some relief.
• Treasury Yields: Dropped, with the 10-year yield at 4.45%, while the 2s-10s curve flattened to +22.0bp.

Currency Market Summary: Dollar Weakness Drives Flows

• EUR/USD: +0.35%, lifted by geopolitical optimism.
• USD/JPY: -0.30%, pressured by falling yields.
• GBP/USD: +0.23%, sustained by positive momentum.
• AUD/USD: +0.65%, outperforming on commodity strength.
• Crosses: EUR/JPY +0.04%, GBP/JPY -0.06%, AUD/JPY +0.33%.

Outlook: Markets Brace for Further Volatility

With key economic data and geopolitical risks still unfolding, traders remain cautious, eyeing Fed signals, trade developments, and Ukraine peace talks for further market shifts.