The US Dollar weakened after a Supreme Court ruling said President Donald Trump exceeded his authority when he imposed broad global tariffs on most US trading partners. Officials then announced new 15% tariffs under a different law.
Earlier, the Dollar was steady after US data releases, including personal consumption expenditure. The Dollar Index (DXY) finished Friday at 97.79, down 0.13%, after hitting a low of 97.58.
Market Focus Shifts To New Tariff Plan
Attention now shifts to Trump’s new tariff plan, along with upcoming US data and communication from the Federal Reserve. Trump’s State of the Union is also seen as a possible driver of DXY and overall Dollar sentiment.
The US economic calendar starts tonight with the Chicago Fed National Activity Index for January. The article notes it was produced with help from an AI tool and reviewed by an editor.
We saw a similar setup last year. A Supreme Court ruling on tariffs caused a sharp—but temporary—drop in the DXY. This is a reminder that political headlines can quickly outweigh economic data. The main point was the jump in short-term volatility, not a lasting change in direction.
With uncertainty high, implied volatility in FX options is rising. The Deutsche Bank FX Volatility Index (CVIX) has moved up to 7.8, its highest level this year. This shows markets expect bigger-than-normal swings in the Dollar. Because of that, it may make more sense to use strategies that benefit from volatility, rather than trying to guess the next direction.
Positioning For Volatility Rather Than Direction
Buying option straddles on major pairs like EUR/USD ahead of key events—such as upcoming Fed statements or trade announcements—can be a sensible approach. It can profit from a large move either up or down. Many traders found this worked well during the tariff confusion of 2025.
Historical data from the 2018–2019 trade disputes shows that early tariff headlines often pushed the DXY more than 0.75% within 24 hours. Last year’s event followed the same pattern, and similar knee-jerk moves may happen again in the coming weeks. This makes unhedged, short-term directional bets especially risky right now.
For traders already holding long-dollar positions, buying out-of-the-money puts on a Dollar index ETF such as UUP can be a lower-cost way to hedge against a sudden drop. The market is currently pricing in a 35% chance the DXY reaches 96.50 within the next 30 days. That makes portfolio protection an important focus heading into March.
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