BUZZ-COMMENT-US recap: EUR/USD slips as risk tone sours

Feb 26 (Reuters) - The dollar index rose on Wednesday but pared its gains as Treasury 10-year yields slid for a sixth day following comments by U.S President Donald Trump and special advisor Elon Musk on slashing government spending, while U.S shares slipped prior to Nvidia earnings.

Musk said the U.S. must move quickly to achieve a trillion dollar deficit reduction, warning that the country would go bankrupt without spending cuts.

Trump said the U.S. will announce EU tariffs soon and that new tariffs on imports from Mexico and Canada would take effect on April 2. He added that Europe would give Ukraine security.

In U.S. data, the U.S. Commerce Department said new home sales plunged 10.5% last month, negatively impacted by high mortgage rates and unusually cold weather.

EUR/USD orbited 1.05 throughout the session, hemmed in by large option expiries and lower euro implied volatility. Downside option skews eased on optimism about a possible Ukraine deal and a record close for European shares. Gains were capped by its 100-day moving average at 1.0527 with a rate cut by the European Central bank expected next week. A positive outlook for the pair would starts to turn bearish below 1.04.

GBP/USD led gainers, fueled by a more favorable risk tone and limited concern that U.S trade policy will impact the U.K. economy.

Bank of England policymaker Swati Dhingra said the bank may not need to take action if a fragmentation in global trade is "orderly".

British Prime Minister Keir Starmer is slated to meet Trump on Thursday. Cable continues to track its upper Bollinger higher, though bulls are not seen participating in full until it tops 1.28. The 100-day moving average at 1.2637 offers nearby support.

EUR/GBP revisited its year-to-date low at 0.8263 before paring losses.

USD/JPY reversed most of its gain as Treasury 10-year yields and WTI oil retreated. At the G20 meeting, Japan's top currency diplomat, Atsushi Mimura, said he did not see any disparity between recent yen moves and a slew of positive economic data that has heightened expectations of a Bank of Japan rate hike.

Japan also told its counterparts that free, open and rules-based trade was important to sustain global economic growth.

USD/JPY is seen as largely rangebound between 148 and 152 with bouts of short-covering holding it above its December low of 148.65. U.S. PCE and Tokyo CPI on Friday may help guide direction.

AUD/USD found support versus the greenback at its 21-day moving average at 0.63 even as lower energy prices, worries about metal tariffs and a weaker yuan weighed.

Treasury yields eased 1 to 4 basis points as the curve flattened. The 2s-10s curve was down about 2 basis points to +17.1bp.

The S&P 500 was down 0.17% after giving up earlier gains

WTI oil fell below $70/bbl to a two-month low after a surprise build in U.S. weekly stockpiles.

Gold eased 0.07%.

Heading toward the close: EUR/USD -0.25%, USD/JPY -0.11%, GBP/USD +0.13%, AUD/USD -0.61%, =USD +0.22%, EUR/JPY -0.39%, GBP/JPY -0.03%, AUD/JPY -0.70%.

For more click on FXBUZ