Trade tensions are back in focus and the dollar has started the week on the back foot as renewed US tariff measures inject fresh uncertainty into global markets. Safe-haven currencies are gaining, while investors reassess risk exposure across USD, EUR and GBP pairs.
Key Highlight
- US markets weaken amid ongoing trade uncertainty
Market Recap
This week saw the US dollar remain firmly supported, driven by a combination of geopolitical tensions and resilient US economic data, while Europe and the UK faced softer momentum signals.
The dollar strengthened through much of the week as investors moved toward safe-haven assets amid renewed US-Iran tensions and higher oil prices. Momentum was reinforced by a series of stronger-than-expected US releases, including durable goods orders, industrial production, jobless claims and the Philadelphia Fed survey — all pointing to continued underlying resilience in the US economy.
However, the greenback eased into Friday after the US Supreme Court ruled that last year’s global tariff measures exceeded presidential authority. The removal of tariffs, which had left a sizeable gap in federal revenues, reduced pressure on corporate earnings and growth expectations. That said, the White House indicated alternative trade measures remain possible, meaning trade policy uncertainty has not fully disappeared.
Sterling started the week on the back foot following dovish remarks from Bank of England policymaker Catherine Mann and softer UK inflation data. Markets are now pricing close to 50bps of rate cuts this year. Improved UK flash PMI readings on Friday helped the pound recover some ground, tempering expectations for more aggressive easing beyond March.
The euro remained comparatively subdued. Weaker German sentiment and uncertainty surrounding ECB leadership weighed on the currency, although stronger PMI data and steady wage growth around 3% year-on-year support the European Central Bank’s current pause in policy adjustments.
Market Overview:
The US dollar has begun the week under pressure after trade policy uncertainty resurfaced. President Trump reintroduced a broad global tariff at 10%, later increased to 15%, following the Supreme Court’s decision to overturn previous measures.
Markets have reacted by demanding a higher risk premium on US assets, pushing the dollar lower while traditional safe-haven currencies outperform. The Japanese yen and Swiss franc have led gains, with the euro also advancing. For now, renewed policy uncertainty appears to be outweighing any optimism about reduced effective tariff rates in parts of Asia.
In the near term, USD direction will depend on whether trade tensions escalate further and how this influences Federal Reserve rate expectations. Defensive positioning currently dominates, limiting upside momentum for the dollar.
Europe & UK Focus
Attention now turns to key European confidence and inflation data, which will offer insight into first-quarter growth trends.
- Germany: IFO business climate survey (expected 88.3) and final Q4 GDP figures
- Eurozone: Final CPI (1.7% YoY, core 2.2%)
- France & Germany: National inflation releases
- UK: GfK consumer confidence data
Wage growth and services inflation remain central to shaping expectations around the ECB’s next move.
In the UK, political developments are also being monitored ahead of the Gorton and Denton by-elections, where any signs of fiscal slippage could weigh on gilt markets and sterling.
United States Data Watch
A busy US calendar will help determine whether price pressures are building further following last week’s firm PCE reading. Key releases include:
- Durable goods and factory orders
- Consumer confidence (expected 88)
- Regional Fed surveys
- Weekly jobless claims
- Producer Price Index (Friday)
- Housing data and construction spending
These indicators will provide insight into inflation trends and the resilience of domestic demand.
Global Highlights
Elsewhere, markets will be watching:
- Tokyo CPI and Japanese industrial production
- Australia CPI
- Canada GDP
23rd February 2026
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