Tech-Led Equity Rebound as AI Fears Ease and Earnings Take Focus

The EUR/USD pair is consolidating strong gains from the previous two sessions, trading within a narrow range during Tuesday’s Asian session.

A modest recovery in the US Dollar is acting as a mild headwind for the pair, following the Greenback’s slide to a six-day low in the prior session. However, sustained USD strength appears limited as markets increasingly price in two additional interest rate cuts by the Federal Reserve later this year. The prevailing risk-on sentiment is also capping demand for the safe-haven Dollar.

Adding to USD pressure, Bloomberg News reported on Monday that Chinese regulators have advised financial institutions to reduce their holdings of US Treasuries amid concerns over concentration risk and market volatility. This development, coupled with ongoing questions surrounding the independence of the US central bank, continues to favor USD bears.

On the Euro side, the European Central Bank’s relatively hawkish stance remains supportive. The ECB has kept rates unchanged since ending a year-long easing cycle in June, while resilient economic growth has eased the need for further policy support. This sharp contrast with expectations for additional Fed easing reinforces the view that the path of least resistance for EUR/USD remains to the upside, with any corrective pullbacks likely to attract buyers.

Market participants now turn their attention to the US monthly Retail Sales data and speeches from key FOMC members for near-term direction. That said, focus will remain firmly on the delayed release of the US Nonfarm Payrolls report on Wednesday, followed by US consumer inflation data on Friday.

Gold prices edge lower during Tuesday’s Asian session, snapping a two-day winning streak amid mixed fundamental signals.  The pullback comes as an improving global risk tone weighs on demand for traditional safe-haven assets. Political uncertainty eased following Japan’s snap election over the weekend, while signs of de-escalating tensions in the Middle East have further lifted investor confidence.

However, losses in the yellow metal are being cushioned by a weaker US Dollar and expectations of a more accommodative Federal Reserve. Markets are pricing in at least two 25-basis-point rate cuts by the Fed in 2026, which keeps US yields subdued and supports non-yielding assets such as gold.

Investor caution also remains evident ahead of key US macroeconomic events. Traders are reluctant to take aggressive positions before Wednesday’s release of the closely watched US Nonfarm Payrolls report and Friday’s US consumer inflation data, both of which are expected to provide clearer guidance on the Fed’s future policy path.

Geopolitical developments have additionally reduced near-term safe-haven demand. Indirect talks between the US and Iran on Tehran’s nuclear program concluded last week with an agreement to continue diplomatic engagement, easing fears of a potential military escalation in the Middle East. Comments from officials on both sides pointed to a constructive atmosphere, reinforcing market optimism.

Looking ahead, the US monthly Retail Sales data due later on Tuesday may offer short-term direction. However, market focus will remain squarely on the upcoming US labor market and inflation releases, which are likely to act as the next major catalyst for the US Dollar and gold prices.

Oil prices edged slightly lower during Asian trading on Tuesday, giving back a portion of the previous session’s gains as markets remained cautious amid lingering geopolitical risks and ahead of key economic data from major oil-consuming nations. A weaker US Dollar also supported commodity prices on Monday, although the Greenback stabilized modestly in Tuesday’s session.

Geopolitical concerns resurfaced after the US Department of Transportation’s Maritime Administration issued an advisory on Monday urging US-flagged vessels to remain as far from Iranian waters as possible when transiting the Strait of Hormuz and the Gulf of Oman. The agency specifically recommended that ships stay closer to Oman during the crossing, citing the risk of potential boarding by Iranian forces.

The advisory underscored ongoing tensions between Washington and Tehran, even as both sides reported progress in recent discussions and signaled a willingness to continue negotiations over Iran’s nuclear program. However, Iran has pushed back against calls to halt nuclear enrichment, a central sticking point in talks with the United States.

Market attention now turns to upcoming economic data from the world’s largest oil consumers, which could shape near-term demand expectations.

In China, consumer price index (CPI) data is scheduled for release on Friday, just ahead of the week-long Lunar New Year holiday. Travel activity and fuel demand in the world’s largest oil importer are widely expected to pick up during the festive period, potentially providing support to crude demand.

US equities ended higher on Monday, extending a rebound in the technology sector following sharp, AI-driven losses last week.  Investor attention now turns to a packed week featuring the release of delayed US labor market and inflation data, alongside another round of corporate earnings.

Wall Street’s major averages had already staged a strong comeback on Friday, with the US 30 reaching its record high and both the US 500 and US Tech 100 gaining around 2%, as stocks rebounded from the midweek technology sell-off.

The late-week rebound was driven primarily by gains in chipmakers and AI-related stocks, which had borne the brunt of heavy selling amid concerns over elevated valuations and the potential for AI-driven disruption to existing software business models.

Earnings remain a key focus in the days ahead. Consumer giant Coca-Cola and automaker Ford Motor are among the major names scheduled to report this week Other notable technology firms, including Datadog, Spotify, Cisco Systems, and Applied Materials, are also due to report earnings later this week.

Beyond earnings, investors are bracing for a series of important US economic data releases that were delayed by a brief government shutdown.The closely watched January Nonfarm Payrolls report is now scheduled for release on Wednesday. Recent private-sector employment data showed weaker-than-expected job growth, raising questions about whether the previously resilient labor market is beginning to cool. The January Consumer Price Index report is due on Friday and will be scrutinized for signs that inflation pressures are easing sufficiently to allow the Federal Reserve to consider interest rate cuts later this year