USD strengthens as Fed holds rates; ECB cuts delayed amid trade tensions

The US dollar index gained 0.4% as the Federal Reserve maintained current interest rates while mixed economic data clouded the policy outlook. EUR/USD declined 45 pips to 1.0885 as ECB rate cut expectations were pushed back following stronger-than-expected European inflation prints. Trade tensions escalated with ongoing US-China negotiations showing limited progress, while US-EU trade discussions faced new complications over technology sector regulations. Gold retreated $18 to $2,502/oz as dollar strength and higher yields reduced safe-haven demand. Currency markets experienced elevated volatility with the VIX spiking to 17.8. USD/JPY climbed to 147.20, benefiting from widening rate differentials. Market positioning suggests continued dollar support unless upcoming data significantly disappoints. Technical analysis indicates EUR/USD approaching critical support at 1.0850, with a break potentially accelerating losses toward 1.0800.