Risk sentiment stayed fragile early Tuesday due to the lack of major negative headlines, mixed remarks from U.S. President Donald Trump, and caution ahead of this week’s high-impact U.S. economic data. Additional pressure on the U.S. Dollar came from fears of weaker U.S. employment data, China’s anti-USD actions, and growing discussion around the Federal Reserve (Fed) independence. Despite the softer U.S. Dollar, gold and silver failed to attract buyers, and the earlier rally in major currencies and Antipodeans struggled to extend.
Donald Trump said he wants to begin negotiations with Canada immediately and also claimed that China will ban ice hockey in Canada. Trump further confirmed that he and Chinese President Xi Jinping will meet in the first week of April.
The New York Federal Reserve January survey showed one-year inflation expectations easing to 3.1% from 3.4%. Separately, Chinese regulators reportedly advised domestic financial institutions to reduce exposure to US Treasuries due to concentration risk and increased market volatility. This guidance was framed as portfolio diversification rather than a judgment on US creditworthiness and does not apply to state holdings. Meanwhile, the latest Commitment of Traders (IMM) data released on Friday showed speculative U.S. Dollar short positions more than doubled to $16.82 billion from $7.98 billion previously.
In Europe, European Central Bank (ECB) President Christine Lagarde said inflation is expected to stabilize at the 2% medium-term target. Bundesbank President Joachim Nagel stated the ECB is unlikely to respond to a temporary dip below 2% inflation, as forecasts point to a medium-term recovery. Analysts also said the early resignation of Francois Villeroy de Galhau, more than a year before his term ends, is unlikely to disrupt the ECB’s policy path. His departure in June allows French President Emmanuel Macron to appoint a new Banque de France governor ahead of the 2027 presidential election, but markets see minimal near-term policy risk.
In Japan, the traditional pattern of foreign investors buying equities while selling the yen to hedge currency risk appears to be weakening. Since Japan’s election result, the yen has strengthened even as Japanese equity indices reached record highs again today. Japanese stocks have surged this week on expectations of more expansionary government policies, particularly benefiting manufacturing and defence sectors. Some analysts believe foreign investors may now be more willing to hold yen exposure without hedging, which could reduce long-term downward pressure on the yen, although this view remains debated.
In the UK, retail sales recorded their strongest growth since August. British Retail Consortium data showed total retail sales rose 2.7% year-on-year in January, more than double December’s pace. Like-for-like sales increased 2.3%, marking the best performance in several months and indicating stronger underlying demand. Bank of England policymaker Catherine Mann said tariffs imposed by U.S. President Donald Trump are pushing Chinese export prices higher for the UK, noting that trade tensions are being transmitted globally through pricing behavior rather than trade volumes.
In Australia, the Westpac–Melbourne Institute consumer confidence index fell 2.6 points to 90.5 in January, reversing gains seen after last year’s rate cuts. The ANZ–Roy Morgan survey remained weaker, with most components deteriorating. In contrast, the National Australia Bank business survey showed business conditions easing slightly while confidence improved. Labour costs, purchase costs, and final prices fell to their lowest levels since the pandemic, easing cost pressures and supporting hopes at the Reserve Bank of Australia that the recent CPI inflation spike is temporary.
In Asia, Singapore raised its growth forecast to 2–4%, citing a stronger-than-expected end to 2025 and a supportive global environment. China’s onshore yuan strengthened past 6.91 per dollar for the first time since May 2023. Gold prices declined as markets tilted modestly toward risk.
Against this backdrop, the U.S. Dollar Index (DXY) extended its decline to a third day, falling to its lowest level in over a week. EURUSD, GBPUSD, AUDUSD, and NZDUSD paused after a two-day recovery, while USDJPY continued to fall and USDCAD declined for a third straight session. Gold and silver recorded their first daily losses in three days, cryptocurrencies extended their early-week pullback, crude oil prices retreated, and Asia-Pacific equities posted mild gains in line with Wall Street’s performance.
EURUSD looks past mostly upbeat comments from European Central Bank (ECB) officials and the pullback in the US Dollar as markets turn cautious ahead of this week’s key U.S. data on employment and inflation. The pair is also weighed down by uncertainty around potential Ukraine–Russia peace talks and U.S. President Donald Trump’s opposition to the European Union trade stance involving India, Canada, and China.
GBPUSD also ignores strong UK retail sales and slightly positive comments from the Bank of England (BoE), instead moving in line with broader Euro-driven sentiment.
Meanwhile, USDJPY extends the previous day’s decline despite strong Japanese equity performance. The pair remains under pressure due to fears of government intervention to support the weaker JPY, along with the yen’s traditional safe-haven status and the hawkish bias of the Bank of Japan (BoJ).
Like major currencies, commodity-linked currencies, commonly called the Antipodeans, are trading mixed as markets wait for key U.S. data. AUDUSD and NZDUSD pause their two-day recovery due to mixed domestic data, a cautious risk mood, and China-related concerns.
In contrast, USDCAD falls for a third consecutive day to its lowest level in over a week after U.S. President Donald Trump signaled fresh trade talks with Canada and recent positive data from Ottawa. However, the decline in crude oil prices, a key Canadian export, is limiting further downside in the USDCAD pair.
Silver posts an intraday loss of more than 2.0% by press time as market indecision and a mild shift toward risk assets outweigh the impact of a softer USD. Gold also moves lower, despite earlier support from China-related fears, cautious market optimism, and technical signals that had previously favored the bullion.
WTI crude oil struggles to benefit from easing tensions between the U.S. and Iran and rising supply risks from Russia and other Middle East producers. Concerns that slowing momentum in China could weaken energy demand also weighed on prices, pushing black gold to its first daily loss in three sessions.
Elsewhere, cryptocurrencies trimmed last week’s gains due to the lack of major industry developments and growing doubts that recent positive signals from China and the U.S. will help retail traders affected by the latest sell-off.
In contrast, news from Alphabet, Google’s parent company, supported Wall Street and Asia-Pacific equities amid a mildly positive risk mood and a softer USD. Alphabet announced plans to issue a 100-year bond in a landmark technology-sector debt sale, the first such issuance since the dot-com bubble.
Speeches from various central bank officials, mid-tier U.S. job numbers, and Retail Sales will shape Tuesday’s economic calendar ahead of Wednesday’s key NFP (Non-Farm Payrolls) report.
Given the recent pressure on the USD from job data concerns, China-related developments, and risk sentiment, any further weakness in incoming data could keep USD sellers optimistic ahead of the crucial data release. A softer USD may allow major currencies to edge higher, but Gold and Silver are likely to remain subdued unless market sentiment deteriorates further. Meanwhile, cryptocurrencies may drift lower, and equities could struggle to extend gains unless there is a clear improvement in overall market mood.
May the trading luck be with you!
