The US Dollar steadied on Monday after a weak start, with the USD Index ending the day almost unchanged. Early Tuesday, it edged up towards 97.90 as markets watched tariff news, with ADP Employment Change 4-week Average and February Consumer Confidence data due later, alongside speeches from several Federal Reserve officials.
The Dollar dipped after a US Supreme Court ruling against President Donald Trump’s tariffs, followed by a rise in global tariffs to 15% from 10% with immediate effect. US shares later drew safe-haven demand for the Dollar, and the Wall Street Journal reported plans for new national security tariffs on about six industries under Section 232 of the Trade Expansion Act of 1962, separate from the 15% levy.
China Holds Rates Steady
China’s central bank kept the one-year and five-year Loan Prime Rates unchanged at 3.00% and 3.50%. The move matched expectations and saw little market reaction.
EUR/USD slipped after topping 1.1830 on Monday and traded near 1.1770 on Tuesday morning. USD/JPY rose above 155.00, while Japan’s Finance Minister Satsuki Katayama said the government would review the court decision details.
GBP/USD stayed range-bound below 1.3500. Gold rose more than 2% on Monday, hit a February high above $5,200, then fell to just over $5,150, down more than 1% on the day.
Looking back at this time last year, the market chaos surrounding the new 15% global tariff was a major signal. The immediate flight to the US Dollar as a safe haven, despite the news originating from the US, set the tone for the months that followed. We saw this strength push the US Dollar Index (DXY) to a peak of 101.50 in the second quarter of 2025 before the economic drag from the tariffs began to weigh on it.
Volatility Trades During Tariff Shock
This period in early 2025 underscored the value of owning volatility during periods of trade uncertainty. The VIX, which measures implied volatility on the S&P 500, surged by over 40% in the week following those headlines. Derivative traders who bought call options on volatility indexes or utilized options straddles on major ETFs saw significant returns as markets priced in the new risks.
The sharp rally in USD/JPY above 155 was a key tell, showing that the dollar’s safe-haven status was overpowering that of the Japanese Yen. This was driven by the widening interest rate differential at the time, a theme that has since softened. Today, with the pair trading closer to 149, it shows how quickly macro trends can shift once the initial shock is absorbed and central bank outlooks diverge.
That incredible spike in gold to over $5,150 was a textbook fear trade, but the subsequent reversal was the real opportunity. Traders should remember that while geopolitical shocks cause an initial rush into gold, the secondary effects, such as slowing economic growth, can cap its long-term appeal. Recent inflation data from January 2026 showing the Consumer Price Index holding steady at 2.4% supports a less aggressive outlook for gold right now.
The events of February 2025 ultimately forced the Federal Reserve’s hand later in the year. The drag on global commerce was confirmed when the US trade deficit widened by another 8% through the third quarter of 2025, prompting the Fed to signal a pause in its tightening cycle. This pivot was a crucial moment, creating opportunities in interest rate futures and options for those positioned for a more cautious Fed.
