The US Dollar recovered most of its intraday losses on Monday and traded mostly flat. Markets had first reacted to a Supreme Court decision that struck down President Donald Trump’s tariffs, and then to his weekend move to add more levies. The Dollar Index held near 97.70. Trump also announced a 15% tariff on global trade. EUR/USD traded near 1.1790 and slipped after earlier gains. GBP/USD held near 1.3490 after giving back most of its earlier rise. AUD/USD traded near 0.7060, down more than 0.40%. USD/JPY traded near 154.60 after a softer Japan January National CPI raised bets that the Bank of Japan could hike rates.

Market Reaction And Dollar Moves

Gold rebounded as risk aversion increased. It hit a three-week high above $5,200 and traded at $5,211, up more than 2%. Central banks bought 1,136 tonnes of gold worth about $70 billion in 2022, the largest annual purchase on record. Upcoming data includes Australian January CPI (25 February) and Tokyo February CPI (26 February). Data due on 27 February includes 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, it is clear that the main drivers of volatility have changed. The Supreme Court’s tariff ruling, followed by a new 15% global levy, was a political shock that shook markets. Today, markets focus less on surprise policy headlines and more on inflation trends and how central banks respond. Last year’s jump in gold above $5,200 was an extreme flight to safety. The same basic idea still applies. Central banks remain major buyers. The World Gold Council said they added a near-record 1,037 tonnes to reserves in 2023. With ongoing geopolitical tension, using options to build long gold exposure can still be a useful hedge against sudden global shocks. Last year, the US Dollar Index dipped to 97.70 and then rebounded as trade uncertainty rose. Now the backdrop is different. The DXY is stronger and has recently hovered near 105 as the Federal Reserve stays cautious on rate cuts amid stubborn inflation. That makes derivative strategies around key releases, like the Producer Price Index (PPI), more relevant than reacting to political surprises.

Shifting Drivers Of Volatility

Last year, USD/JPY near 154.60 was driven by expectations of a Bank of Japan rate hike. Since then, the BoJ made its historic policy shift in 2024, but the rate gap with the US is still very large. That gap now exceeds 500 basis points. This suggests futures trades focused on the interest-rate differential are more structural than the short-lived risk-off moves seen in 2025. Unlike last year, when the Australian Dollar was moved mainly by broad tariff headlines, it now reacts more to specific economic releases. Australia’s monthly CPI indicator for January 2026 came in at 3.5%, slightly above expectations. This supports the view that scheduled data is now a bigger driver for FX pairs. Traders may prefer short-term options to position for volatility around these set release dates. Create your live VT Markets account and start trading now.

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