The US dollar broadly strengthened on Friday, buoyed by easing tariff concerns and supportive month-end rebalancing flows. President Trump's positive remarks regarding progress in trade discussions—particularly a potential tariff deal with Japan and select tariff exemptions by China—boosted market sentiment. However, subdued volatility prevented the dollar index from decisively surpassing the key 100 level.

Treasury Yields Ease on Fed Rate-Cut Bets

U.S. Treasury yields fell 3-5 basis points as markets speculated easing trade tensions might lead to Fed rate cuts, especially amid declining inflation expectations (one-year expectations at 6.5%) and an upward revision in U.S. consumer sentiment to 52.2 in April.

Euro Pressured by ECB Caution

EUR/USD traded cautiously within Thursday’s tight range, restrained by ECB President Lagarde's concerns about tariff-driven inflation uncertainties. Despite bullish option positioning, stretched positions limited upside, with support holding firm near 1.1241. EUR/JPY showed technical strength, targeting a close above key resistance at 163.21.

Sterling Slightly Softer Despite Strong Data

GBP/USD eased despite stronger-than-expected UK retail sales, impacted by BoE policymaker Greene’s cautious inflation outlook tied to U.S. tariffs. Technically, the pair formed a bullish pattern above support at 1.3270, yet weak momentum raised doubts about further gains toward 1.3423.

Yen Volatility Expected Amid Golden Week

USD/JPY briefly rose above 144, supported by positive U.S. data, but retreated amid easing yields. Increased volatility is anticipated during Japan’s Golden Week holidays, coinciding with crucial Japan-U.S. trade discussions and BOJ policy decisions. A breakout from the 141.60-144.60 range remains pivotal.

Commodities Mixed; Equities Gain

Oil edged higher (+0.48%) amid cautious optimism. Gold (-1.7%) and copper (-1.3%) weakened due to dollar strength. U.S. equities advanced, with the S&P 500 up 0.70%, driven by technology and consumer discretionary stocks.

Currencies at close: EUR/USD -0.27%, USD/JPY +0.22%, GBP/USD -0.15%, AUD/USD flat, Dollar Index +0.31%.

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