COMMENT-US recap: EUR/USD jumps to new 2025 high

March 4 (Reuters) - The dollar index steadied near a three-month low on Tuesday as foreign leaders reacted to U.S. tariffs and comments from President Donald Trump and his cabinet.

U.S. Commerce Secretary Howard Lutnick mentioned that prices might increase but suggested that tariffs could be lifted if countries show progress in stopping fentanyl. Separately, Trump criticized the inability of U.S. banks to operate in Canada and warned of reciprocal tariffs if Canada imposes retaliatory measures. His remarks come ahead of an evening speech to Congress, where he is expected to address various topics, including the March 14 debt-ceiling deadline.

Canadian Prime Minister Justin Trudeau announced 25% tariffs on C$30 billion worth of U.S. imports, with an additional C$125 billion at risk of tariffs in 21 days. He told Trump that the tariffs on Canadian imports were "a very dumb thing to do."

Mexican President Claudia Sheinbaum argued there was no justification for the 25% U.S. tariffs on Mexican imports and stated that her government would respond with both tariff and non-tariff measures. These comments follow China's announcement of retaliation against American agricultural and food products.

Falling U.S. share prices, a drop in oil, and growing expectations of Fed rate cuts supported low-yielding haven currencies against their commodity-linked counterparts.

EUR/USD rose to a near year-to-date high, and European bond yields advanced after the European Commission suggested joint EU borrowing to fund defense expansion.

The euro was also buoyed by renewed prospects for peace in Ukraine after President Volodymyr Zelenskiy expressed regret over a recent clash with Trump and showed willingness to work under his leadership for lasting peace.

With the European Central Bank policy meeting approaching, momentum is with euro bulls. The pair has surpassed its 100-day moving average at 1.0508 and is nearing the top of a 21-day Bollinger Band. Further gains past the December 6 high of 1.0629 could lead to a rally towards the 200-day moving average of 1.0721.

USD/CHF is on track to close below its 100-day moving average for the first time in four months.

GBP/USD continues its steady rise on hopes that increased U.K. defense spending and possibly avoiding U.S. tariffs will boost domestic growth. The pair is approaching its 200-day moving average at 1.2786, though bullish participation is limited, and the pound is gradually losing ground against the euro. Bank of England officials, including Governor Andrew Bailley, are scheduled to speak on Wednesday.

USD/JPY recovered from an earlier loss as the U.S. 10-year Treasury yield firmed, and EUR/JPY short positions were covered. The pair was also supported by corporate hedging demand as March began.

Comments from Bank of Japan Governor Kazuo Ueda on Wednesday may provide further direction.

Treasury yields were mixed, with 2-year yields dipping to the lowest level in five months as the curve steepened. The 2s-10s curve was up about 5 basis points to +25.8bp.

The S&P 500 fell 0.78%, dragged down by financials

WTI oil fell 0.48% on a mix of OPEC+ supply and U.S. demand concerns.

Gold rose 0.53% on haven demand while copper slipped 1.0%

Heading toward the close: EUR/USD +0.93%, USD/JPY -0.30%, GBP/USD +0.54%, AUD/USD +0.03%, =USD -0.66%, EUR/JPY +0.65%, GBP/JPY +0.27%, AUD/JPY -0.10%.