The euro rallied sharply on Wednesday, rising nearly 1.5% to a four-month high of 1.0786, driven by optimism after the U.S. delayed tariffs on Canada and Mexico. EUR/USD benefited from market hopes of eased trade tensions, favorable German fiscal stimulus expectations, and positive Ukraine peace developments. Traders positioned for further euro strength, targeting the critical 1.10 level ahead of Thursday's ECB meeting.

Dollar Declines as U.S. Economic Concerns Mount

The U.S. dollar fell broadly, hitting four-month lows amid disappointing ADP employment data showing only 77,000 jobs added in February. Treasury yields declined, reflecting heightened caution; the yield curve steepened to +25.3bps. ISM services data improved, though confusion persisted over U.S. economic resilience. Markets await Friday’s nonfarm payroll report for clearer direction.

Sterling Extends Gains Above Key Technical Levels

GBP/USD rose above its 200-day moving average at 1.2787, reaching a fresh four-month high. Rising UK yields boosted the pound, though cautious sentiment lingered ahead of key U.K. economic releases. Investors remain watchful for signals from Bank of England policymakers on inflation risks.

Yen Strengthens Amid Risk-Off Environment

USD/JPY remained defensive, edging closer to yearly lows around 148.10 as risk aversion continued. Safe-haven demand supported the yen, reinforced by weaker U.S. yields and equity market volatility. EUR/JPY short-covering flows offered temporary relief.

Mixed Commodities Reflect Volatile Sentiment

Oil prices plunged over 3% on higher U.S. crude stockpiles, reaching a three-year low. Copper surged over 5% on China’s stimulus plans and Europe’s infrastructure spending optimism, while gold edged higher amid broader market caution.

Outlook: Volatility Ahead

Markets brace for heightened volatility, closely monitoring ECB decisions, U.S. payrolls, and ongoing geopolitical developments.