The US Dollar weakened amid geopolitical tension and shifts in US trade policy after the Supreme Court ruled Trump-era tariffs illegal and new levies followed. A firmer-than-expected US Producer Price Index did not lift the Dollar, and the DXY traded near 97.60, down about 0.20% on the day and slightly lower over the week.
EUR/USD traded near 1.1810 after Germany’s flash HICP came in at 2% YoY versus 2.1% expected, and 0.4% MoM versus 0.5%. GBP/USD hovered near 1.3470 after nearing a one-month low, while USD/JPY sat around 156.00 as Tokyo CPI rose 1.6% YoY and the ex-fresh food measure fell below 2% for the first time since 2024.
Key Moves Across Major Pairs
AUD/USD was near 0.7120 ahead of Australia’s TD-MI Inflation Gauge on Monday. USD/CAD traded near 1.3630 after Canada’s Q4 GDP fell at an annualised 0.6%, following revised 2.4% growth previously.
Gold traded around $5,260, a one-month high, with an earlier 2026 high of $5,598 referenced. The week includes multiple central bank speakers and releases such as Eurozone HICP, US ADP, US jobless claims, and US February Nonfarm Payrolls with Average Hourly Earnings, unemployment, and participation data.
With the US Dollar Index slipping near 97.60, we are seeing a clear reaction to renewed trade policy uncertainty. The market is ignoring strong producer price data, focusing instead on the risk that fresh levies could slow down the economy. This dollar weakness is the main theme we need to trade around in the coming weeks.
The big test for the dollar will be the Nonfarm Payrolls report on Friday, March 6. We remember how the labor market consistently beat expectations through 2024 and 2025, which kept the Fed from cutting rates sooner. A surprisingly strong jobs number, like the +250k prints we saw last year, could quickly reverse the dollar’s decline and catch many traders off guard.
In Europe, the focus is on the upcoming Harmonized Index of Consumer Prices (HICP) data. After the high inflation prints we dealt with through 2024, ECB President Lagarde seems confident that price pressures are easing. Options traders should be positioned for a potential spike in EUR/USD volatility on Tuesday, as a higher-than-expected inflation figure would directly challenge the ECB’s dovish narrative.
Central Bank Watch And Key Catalysts
The Bank of England’s signal for potential rate cuts makes us cautious about the Pound Sterling’s recent recovery. Governor Bailey is clearly laying the groundwork for looser policy, which could put significant pressure on GBP/USD. We should consider this a bearish signal for the pound against currencies with more hawkish central banks.
Meanwhile, the situation with the Japanese Yen remains unchanged as Tokyo’s inflation has once again fallen below the Bank of Japan’s 2% target. This confirms the BoJ is in no position to tighten policy, making USD/JPY extremely sensitive to the direction of US yields. The pair’s fate this week will likely be decided by the US jobs report on Friday.
Gold’s climb toward $5,260 is being driven by the weak dollar and geopolitical fears. This move is supported by a powerful long-term trend of central bank buying, which we saw accelerate massively after 2022, with nations like China and Turkey adding hundreds of tons to their reserves through 2024 and 2025. This institutional demand provides a strong floor for the price, making gold a preferred asset as long as trade uncertainty continues.
