Insights 
VT 
The US Dollar is gaining strongly against the G10 currencies. This follows the reduction of tariffs by the US to 30% and China to 10% for 90 days, allowing more time for negotiations.
The Japanese Yen and Swiss Franc are underperforming, falling nearly 2% against the US Dollar. The Euro has dropped nearly 1.5%, with the Swedish Krona and British Pound down around 1%. The Canadian and Australian Dollars are faring better, each declining only 0.3% against the US Dollar.
Risk Appetite and Yield Movements
Equity markets in Asia and Europe show strong risk appetite, with US futures up by 3%. The US 10-year yield is climbing to 4.45%, from above 4.15% on April 30. The US 2-year yield is up by 11 basis points, reflecting changing expectations for Federal Reserve rate cuts.
Commodities see West Texas Intermediate oil pushing towards $75 per barrel after bouncing from $55. Copper remains flat, and gold prices decline, threatening a dip below $3200. The week includes US budget balance data, CPI, and retail sales figures. Federal Reserve officials, including Chair Powell, are scheduled for speaking engagements.
With the US Dollar pressing higher across the board, the recent rollback in trade tariffs serves as a supportive backdrop. Washington’s decision to lower levies to 30%, while Beijing scales back its own to 10% for a 90-day pause, acts as a de facto truce. This breathing room has lifted broad market sentiment. It is not a resolution, but it does reduce short-term uncertainty—something markets appreciate. We are seeing that reflected in the heightened appetite for risk assets.
Currencies traditionally sought during periods of market anxiety—namely the Japanese Yen and Swiss Franc—have lost ground rapidly. Nearly 2% lower against the Dollar, the drop speaks more to an unwinding of defensive positions than to an economic reassessment of those countries. The Euro’s slide, by contrast, edges closer to 1.5%. That marks a catch-up move with its own set of economic doubts layered over stabilising energy dynamics. Another notch down leads us to the Swedish Krona and Sterling, which both dipped by around 1%. The pullback there points to increasingly constrained central bank flexibility and widening growth differentials.
In contrast, the Canadian and Australian Dollars are bending but not breaking. Their losses of 0.3% suggest markets still expect resilience, particularly with commodity-linked assets holding up relatively well. Oil’s rebound—now challenging $75 per barrel from the recent dip at $55—is helping to steady both of those currencies amid broader Dollar strength. Copper remains unmoved, which puts a lid on any speculative enthusiasm. And then there’s gold—under pressure. Now teetering closer to the $3200 threshold, the metal’s decline signals that real yields may continue to rise and remove some of its allure as a hedge.
Powell and Policy Implications
Yields on the US 10-year benchmark are marching upward again, now nested around 4.45%, which was barely above 4.15% just two weeks ago. More interestingly, the 2-year note has firmed by 11 bps in just a few sessions. This type of move in short-dated yields points to a reevaluation: the market has begun pulling back from the idea of multiple rate cuts this year. The data calendar is partly responsible. With CPI, US retail sales, and the national fiscal balance all landing this week, there is no room for soft hands. Calm today could be under review tomorrow.
Powell and fellow policymakers are now stepping into the spotlight. What might have been seen as guidance a fortnight ago will now be parsed word-by-word for bias and shift. If they stick to a script that nods to sustained inflation exposure—rather than hinting at easing—the Dollar move has further to go. Particularly if rates expectations are more stubborn than previously expected.
From where we are, several takeaways are beginning to crystallise. Stronger equities, a bid in commodity-linked currencies, and flat-to-rising short yields imply reduced appetite for expecting lower US rates soon. That has to factor into positions. Dry powder should be kept available, as the rerating may not be over. Watching CPI and retail numbers isn’t optional—it will inform how deep or shallow any adjustments need to be. The tone of upcoming speeches may shape the front-end of the yield curve far more than technicals can. Markets are running, but conviction isn’t cemented. This isn’t a trend locked in. It’s a trajectory that’s gathering feedback.
Volatility surfaces for FX, rates, and commodities must be re-evaluated. In the coming sessions, overshoots and reversals will challenge stale positioning. The Dollar’s directional bias is pronounced, but not without speed bumps. Those are best managed with tighter hedging strategies and a more nuanced read on short-term risks. Yield curves, asset correlations, and term premiums are re-aligning. We should expect sharper responses to data and remarks, particularly as they challenge or confirm this new pricing regime.
