The dollar index fell sharply on Friday to its lowest point in May as President Trump threatened a hefty 50% tariff on EU imports and a 25% levy on foreign-made smartphones, notably targeting Apple. Despite Treasury Secretary Scott Bessent’s attempts to reassure markets by highlighting continued foreign appetite for U.S. Treasuries, the intensified trade tensions weighed heavily on sentiment, pushing equities modestly lower and flattening the yield curve slightly.

Euro surges on growth optimism

EUR/USD jumped to a two-week high, supported by dollar weakness, rising gold prices, and upwardly revised German GDP figures. Encouraging geopolitical news, including a Russia-Ukraine prisoner exchange, further boosted confidence. Technically, momentum remains bullish, with immediate support around 1.1280/1.1300.

Sterling hits three-year high on retail sales

GBP/USD broke above 1.35 for the first time in three years, propelled by better-than-expected UK retail sales and rising gilt yields. Sterling approached major technical resistance near 1.3643, while EUR/GBP tested its key 200-day moving average around 0.8380, highlighting sterling strength.

Yen gains ahead of US-Japan talks

USD/JPY dropped sharply, closing a significant price gap to reach early-May lows as markets turned cautious ahead of upcoming U.S.-Japan trade negotiations. Technical risks remain skewed lower, targeting support at 141.68.

Commodity currencies rally on China optimism

AUD/USD surged 1.35%, outperforming peers as metal prices rallied and China eased financial conditions. President Xi Jinping’s talks with Germany’s Friedrich Merz further improved risk sentiment.

Commodities mixed; equities cautious

Gold climbed over 2%, reflecting safe-haven flows amid tariff uncertainties. Copper jumped 3.35%, supported by Chinese stimulus expectations, while oil edged higher on renewed geopolitical concerns. The S&P 500 closed down 0.37%, highlighting persistent investor caution.

Market snapshot:

• EUR/USD +0.70%, GBP/USD +0.85%, USD/JPY -0.99%, AUD/USD +1.35%
• Dollar index (DXY) down 0.83%; U.S. 2s-10s yield spread at +53.7bp