The US Dollar recovered most intraday losses on Monday and traded broadly steady after markets reacted to a Supreme Court decision against President Donald Trump’s tariffs and his weekend move to add more levies. The Dollar Index traded near 97.70, while Trump announced 15% tariffs on global trade.
EUR/USD traded near 1.1790 and slipped after earlier gains, and GBP/USD held near 1.3490 after giving up most of its earlier rise. AUD/USD traded near 0.7060, down over 0.40%, and USD/JPY traded near 154.60 after a soft Japan January National CPI increased bets of a Bank of Japan rate rise.
Market Reaction And Dollar Moves
Gold rebounded on risk aversion, reaching a three-week high above $5,200 and trading at $5,211, up over 2%. Central banks added 1,136 tonnes of gold worth around $70 billion in 2022, the highest annual purchase on record.
Upcoming data includes Australian January CPI (25 February) and Tokyo February CPI (26 February). Releases due on 27 February include Swiss Q4 GDP, Germany’s February flash CPI and HICP, Canadian Q4 GDP, and the US Producer Price Index.
Looking back at the market shock from this time in 2025, we can see how the drivers of volatility have shifted. The chaos caused by the Supreme Court’s tariff ruling and the subsequent 15% global levy was a purely political event that rocked markets. Today, our focus is less on unpredictable policy announcements and more on the path of inflation and central bank responses.
The spike in Gold to over $5,200 last year was an extreme flight to safety, but the logic still holds for us today. We know central banks have continued to be massive buyers, with the World Gold Council reporting that they added a near-record 1,037 tonnes to their reserves in 2023. Given ongoing geopolitical tensions, using options to build long positions in gold remains a smart hedge against unexpected global instability.
Last year’s turmoil saw the US Dollar Index dip to 97.70 before recovering, a reaction to trade uncertainty. We are now in a very different environment with the DXY trading stronger, recently hovering near 105, as the Federal Reserve maintains a cautious stance on interest rates amid sticky inflation data. This makes derivative plays on key releases like the Producer Price Index (PPI) more strategic than reacting to sudden political news.
Shifting Drivers Of Volatility
The situation with the Japanese Yen near 154.60 last year was driven by speculation of a Bank of Japan rate hike. We have since seen the BoJ make its historic policy shift in 2024, but the interest rate difference with the US remains massive. This fundamental gap, which now exceeds 500 basis points, suggests that using futures to trade the interest rate differential is a more structural play than the risk-off trades we saw in 2025.
Unlike last year when currencies like the Australian Dollar were hit by broad tariff news, its movements are now more closely tied to specific data points. We just saw Australia’s monthly CPI indicator for January 2026 come in at 3.5%, slightly above expectations, reinforcing the idea that individual economic data is what moves currency pairs now. This suggests traders should use short-term options to position for volatility around these scheduled data releases.
