The dollar clawed back some losses but still appeared disheveled after White House damage control efforts in the wake of trade adviser Peter Navarro's China comments nL1N2E01DS managed to bolster faith in the phase 1 trade deal and boost risk sentiment.
The risk-on theme dominated the U.S session, with equities, commodities and Treasury yields rising again while the dollar succumbed to selling as safe-haven flows went into reverse.
EUR/USD struck a one-week peaknL1N2E01WE in a rally helped by EUR/JPY breaking higher from a bull pennant, and bargain hunting bulls were likely to target levels near 1.1500.
Unexpectedly strong euro zone PMI, as France broke into growth territory with readings above 50 and other countries well above their levels for May -- invigorated euro bulls.
San Francisco Federal Reserve President Mary Daly encouraged dollar bears to apply pressure with her "whatever we can" comment about bridging the gap between the coronavirus economic collapse and the post-pandemic recovery [nU5N2BQ00V].
Upbeat China trade views and better-than-expected global PMIs spurred traders to press ahead with unwinding their safe-haven dollar holdings.
Other safe havens -- the yen and Swiss franc -- gained against the dollar while gold firmed 0.7%.
USD/JPY failed to benefit from the improvement in risk appetitenL1N2E01RM. It broke below recent double-bottom support at 106.58 and the 50% Fibo of 101.18-111.72 at 106.45,ultimately recording a six-week trough of 106.08 that was just a touch above the May 6 trend low at 105.99.
Despite significant early selling, USD/JPY rebounded off its lows, holding around 106.50 as U.S. trade wound down.
AUD/USD broke above technical resistance, also setting a one-week high.
U.S.-China trade stability would be supportive for Australia's economy, while broad commodity strength also helped the aussie outlook.
Like other markets AUD/USD gains were tempered as the U.S. session wore on, as the risk rebound had gone a bit far considering that the Navarro misunderstanding essentially left the broad macro picture little changed from a day ago.
Sterling continued its drift higher nL1N2E00XV, regaining 1.2500, rising above 100- and 21-day moving average resistance and on target to end the U.S. session near 1.2515 nL1N2E01P1.
GBP/USD ran into resistance before reaching the 10-DMA by 1.2539.
A rise above there would give bulls the advantage and put the 200-DMA at 1.2693 in view. For now, investors appear to be overlooking the lack of progress in EU-UK trade talks.