The US Dollar steadied on Monday after a weak start, with the USD Index closing almost unchanged. Early Tuesday, it inched up toward 97.90 as markets watched tariff headlines. Later today, traders will focus on the ADP Employment Change 4-week Average and February Consumer Confidence, along with speeches from several Federal Reserve officials. The Dollar fell after the US Supreme Court ruled against President Donald Trump’s tariffs. It then came under more pressure after global tariffs were raised to 15% from 10%, effective immediately. Later, safe-haven demand linked to US stocks helped support the Dollar. The Wall Street Journal also 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 decision matched expectations and triggered little market reaction. EUR/USD eased after topping 1.1830 on Monday and traded near 1.1770 on Tuesday morning. USD/JPY climbed above 155.00, while Japan’s Finance Minister Satsuki Katayama said the government would review the court decision in detail. GBP/USD stayed range-bound below 1.3500. Gold rose more than 2% on Monday, reached a February high above $5,200, then slipped to just over $5,150, down more than 1% on the day. At this time last year, the market turmoil tied to the new 15% global tariff was a key signal. Even though the news started in the US, investors still rushed into the US Dollar as a safe haven. That move set the tone for the months that followed. The Dollar’s strength pushed the US Dollar Index (DXY) to a peak of 101.50 in the second quarter of 2025, before the economic hit from tariffs began to weigh on it.

Volatility Trades During Tariff Shock

Early 2025 showed why holding volatility can help during trade uncertainty. The VIX, which tracks implied volatility on the S&P 500, jumped more than 40% in the week after those headlines. Traders who bought call options on volatility indexes or used options straddles on major ETFs saw strong returns as markets priced in higher risk. The sharp move in USD/JPY above 155 was another clear signal. It showed the Dollar’s safe-haven appeal was stronger than the Japanese Yen’s at that time. The move was driven by a wider interest rate gap, a theme that has eased since then. Now that the pair is closer to 149, it shows how fast macro trends can change once the initial shock fades and central bank outlooks diverge. Gold’s spike above $5,150 was a classic fear trade, but the pullback that followed was the bigger opportunity. Traders should remember that geopolitical shocks often trigger an early rush into gold, but the second-round effects—like slower growth—can limit its longer-term upside. January 2026 inflation data, with the Consumer Price Index steady at 2.4%, also supports a less aggressive outlook for gold right now. The February 2025 events eventually pushed the Federal Reserve to adjust later that year. The drag on global trade became clearer when the US trade deficit widened by another 8% through the third quarter of 2025. In response, the Fed signaled a pause in its tightening cycle. That shift was an important turning point, creating opportunities in interest rate futures and options for traders positioned for a more cautious Fed. Create your live VT Markets account and start trading now.

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