Risk sentiment has faltered in recent weeks, and global stock markets have experienced a mild sell-off as the focus shifts to a plethora of economic data released this week. The main focus will be on the Eurozone’s first reading of May CPI and the US core PCE index, both released on Friday. This data may reveal if the market has been too quick to dismiss the possibility of rate cuts this year. If so, we could see risk sentiment improve later this week.

EUR/USD is grinding higher to start the session. Following a three-day weekend in the US, US stock index futures are trading higher early Tuesday, pointing to an improving risk mood. In turn, the US Dollar is struggling to stay resilient against its major rivals. Federal Reserve Bank of Minneapolis President Neel Kashkari told CNBC today that the Fed should wait for significant progress on inflation before lowering the policy rate, according to Reuters. Kashkari added that the central bank could potentially even hike interest rates if inflation fails to come down further. These comments, however, failed to help the USD gather strength.

GBP/USD has regained traction and continues to advance, reaching its highest level in two months. The Pound Sterling gains momentum as traders anticipate that the Bank of England will maintain its borrowing costs for longer to cool inflation. Citigroup strategist Jamie Searle said that the UK election in July will “further reduce the chance of a near-term BOE cut,” adding that it lowers the risk of a later election interfering with the BoE cycle and focuses only on data dependency.

USD/CAD is lower to start the day as the US Dollar is under pressure. Market sentiment is upbeat even though rate cuts from the Fed have been delayed. The US Dollar Index, which tracks the Greenback’s value against six major currencies, extended its losing spell for the third trading session on Tuesday and dropped to nearly 104.40. 10-year US Treasury yields fell further to 4.64% even though market speculation for Fed rate cuts in September has diminished.

Historically, this scenario is favorable for yields on interest-bearing assets, but they still struggle for a firm footing. Risks of Canada’s inflation remaining persistent have eased due to weak consumer spending and a dismal economic outlook, prompting bets favoring rate cuts in June. This week, investors will focus on the Q1 GDP data, which will indicate the economic health of Canada.