The U.S. dollar index rebounded on Thursday after the House approved President Trump’s crucial tax and spending bill, alleviating fears over fiscal uncertainty. Treasury yields dipped slightly, reflecting mixed U.S. economic data: upbeat weekly jobless claims and improved flash PMI contrasted with a continued decline in existing home sales. Federal Reserve officials, notably Governor Christopher Waller, maintained cautious rhetoric, signaling a potential rate cut later this year depending on fiscal sustainability and market stability.

Euro retreats on weak PMI figures

EUR/USD slipped below its key 21-day moving average at 1.1278, pressured by disappointing eurozone PMI data that indicated a contraction in May business activity. ECB minutes further weighed on sentiment, hinting at a possible pause in rate cuts, supported by Joachim Nagel’s comments suggesting borrowing costs were no longer restrictive.

Sterling steady amid fiscal caution

GBP/USD traded quietly near 1.3323, supported by slightly better UK PMI figures that showed moderation in the recent downturn. Yet persistent concerns about elevated UK government borrowing limited gains, with the market awaiting Friday’s retail sales data for clearer direction.

USD/JPY recovers ahead of trade talks

USD/JPY reversed earlier declines to reach near 144.40, driven by short-covering ahead of critical U.S.-Japan trade negotiations. Technically, the pair found support around 143.80, with further upside potentially targeting resistance at the Ichimoku cloud near 145.68.

Markets mixed; equities rise, commodities cautious

The S&P 500 advanced 0.48%, driven by consumer stocks amid improved sentiment. In commodities, oil slipped 0.55% on supply concerns, gold fell 0.54% on dollar strength, while copper edged higher by 0.23%.

Market snapshot:

• EUR/USD down 0.41%, GBP/USD nearly flat (+0.07%)
• USD/JPY up 0.29%, AUD/USD down 0.34%
• 10-year Treasury yield slightly lower; 2s-10s spread at +57.3bp