The US Dollar Index (DXY), which tracks the US dollar against six major currencies, rose after a weak start near 97.50. It turned slightly positive and reached about 97.75 during European trading on Thursday. The dollar bounced back after the US Supreme Court ruled against President Donald Trump’s tariff policy. Investors then focused on whether the US will keep existing trade deals with other countries.

Dollar Rebound And Trade Deal Focus

On Friday, the Supreme Court said Trump could not use emergency economic powers to support his tariff plans and it struck down reciprocal duties. After that, Trump announced a 10% global tariff to keep pressure on countries that have trade deals with the US. On Tuesday, US Trade Representative Jamieson Greer said tariffs could rise to 15% or more for some countries, up from the new 10% level. He did not say which trading partners could face higher rates. Traders expect the Federal Reserve to keep interest rates unchanged at the March and April meetings, based on the CME FedWatch tool. On Wednesday, St. Louis Fed President Albert Musalem said current policy settings strike a good balance between employment and inflation risks. The dollar is showing some strength today. It is moving back toward 97.75 even after last Friday’s Supreme Court ruling against the administration’s specific tariff authority. Markets appear to be balancing the new 10% global tariff threat against a Federal Reserve that looks firmly on hold. This mix of uncertain trade policy and steady monetary policy may shape trading over the next few weeks.

Volatility And Policy Crosscurrents

The risk that duties could rise to 15% or more on unnamed countries creates strong headline risk. This can quickly move the market and push up options prices. The Cboe EuroCurrency Volatility Index (EVZ) has already climbed to 8.5, its highest level in three months, showing rising investor unease. In this setting, volatility-buying strategies, such as straddles on major currency pairs, may benefit if sharp moves occur. The Federal Reserve’s steady approach remains an important support for markets. This view is backed by the latest January 2026 inflation report, which showed CPI at a manageable 2.8%. The CME FedWatch tool shows markets pricing in more than a 90% chance that rates will stay unchanged through the April meeting. That reduces the appeal of aggressive interest-rate bets and shifts attention toward currency volatility instead. This situation is similar to the trade disputes of 2018 and 2019. In that period, unexpected policy announcements often caused fast, short-lived spikes in the DXY. Because of this, defined-risk positions, such as long call or put options, may be safer than holding outright futures contracts, which can carry unlimited risk. Over the next few weeks, the DXY may stay in a choppy range as markets wait for clarity on which countries could be targeted by tariffs. The latest trade data for January 2026 showed the trade deficit widening unexpectedly to $72 billion. This suggests last year’s tariff policies have not yet met their stated goals, which may increase the chance of further market-moving decisions. In this environment, range-trading strategies with built-in protection can be attractive, but stop levels should remain tight. Create your live VT Markets account and start trading now.

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