The Supreme Court struck down President Trump's use of emergency powers to impose widespread tariffs. The court did not rule on refunds. Trump quickly announced a 10% across-the-board tariff under Section 122 of the 1974 Trade Act, which allows the president to impose up to 15% tariff for 150 days. The dollar remained firm after the softer than expected Q4 GDP, which at 1.4% was half the pace the median forecast in Bloomberg's survey. However, it was sold after the court's decision was announced. Yet, key technical levels were not violated and the momentum indicators the dollar's upside correction may not be over.
At the same time, tensions over Iran remain elevated as President Trump indicated a limited strike was possible, even though it appears that he also suggests a 10–15-day window to reach an agreement. Reports indicate that the US has amassed its largest force in more than two decades, and the invasion of Iraq. Gold and April WTI made new highs for the week before the weekend.
US
Drivers: The dollar still seems to be caught up corrective/consolidative technical phase was threatened by the Supreme Court decision, which was as most expected. Given that the more than 25 bp decline in the 10-year Treasury yield this month through early last week, and the fact that the Fed funds futures are discounting more than two Fed rate cuts this year, the greenback has been surprisingly resilient.
Data: Last week's initial estimate of Q4 GDP renders much of the December data due this week, including factory and durable goods orders, house prices, and construction spending largely moot. February survey data, from the Richmond, Dallas, and Kansas Federal Reserve branches is rarely impactful in the best of times. The University of Michigan's consumer confidence survey steals some Conference Board's survey's thunder. Recall that the University of Michigan's survey showed an uptick in sentiment and assessment of current conditions, while expectations softened. The January PPI is due at the end of the week. The base effect suggest headline PPI can ease from 3.0% to around 2.6%, which would put at its slowest pace since last April. The core could ease to 3.0% from 3.3%. It has not been below 3% since last August. Still, the market is confident that the Fed will ease this year more than the median official projected at the end of last year.
Prices: After poking above 98.00, the Dollar Index sold through Thursday's low (slightly above 97.55) after the Supreme Court's decision. A break of 97.45 could signal a test on 97.00. The loss ahead of the weekend was the first decline since February 13, and the momentum indicators look constructive, and the five-day moving average is above the 20-day moving average.
EMU
Drivers: The euro seems less sensitive to interest rates changes and economic data and more caught in a technical correction after the strong run up in late January amid the tensions over Greenland. It fell nearly two cents in the past week and half. The US Supreme Court ruling helped reinforce support near $1.1740.
Data: Eurozone economic calendar is light and devoid of reports that typically drive capital markets. The final January CPI may be a little firmer but the impact on policy expectations is minimal. The swaps market is confident that the ECB is on hold in H1 26. It is discounting around a 40% chance of a cut in Q4, but its decision then has little to do with the January CPI, money supply, or the results of the ECB's survey of inflation expectations or the EU's economic sentiment surveys.
Prices: The euro recovered after the US Supreme Court decision but stopped 1/100 of a cent below Thursday's high. And even then, it must re-establish a foothold above $1.1815-20 to be of note. The momentum indicators are still falling. The euro has not settled above its five-day moving average (now ~$1.1810) since February 11. A break of the $1.1740 area could signal a test on $1.1670-$1.1700.
China
Drivers: The mainland markets re-open on Tuesday, February 24. Since they closed for the extended holiday, the dollar first fell to new lows against the offshore yuan before steadying and returning to where it was before the holiday. Chinese officials have been on a campaign to allow the yuan to gradually appreciate. If there is a target, it is not known. The rolling 30-day correlation between changes in the Dollar Index and the dollar against the offshore yuan is near 0.45, the highest so far this year. It bottomed near zero last on January 21.
Data: Chinese banks will set the one- and five-year loan prime rates on Tuesday. Since they typically follow the PBOC, which has not cut rates, there is no reason to expect a change in prime lending rates from 3.0% and 3.50%, respectively, that has been the case since the last small (10 bp) cut was delivered last May. Beijing could also report foreign direct investment. The inbound direct investment last rose on a year-over-year basis since May 2023. A weak yuan and low interest rate likely discouraged retained earnings, and the tariffs (not only by the US) may have discouraged new investment. However, we suspect the theme is changing. The yuan is rising. The tariff situation appears to be stabilizing. Outbound direct investment is rebounding. Preliminary data from last suggests that Chinese companies may have committed around $12 bln in foreign mergers and acquisitions, a nine-year high for January.
Prices: The US dollar has been confined to around a CNH6.88-CNH6.91 trading range in recent days. There may be scope to test the lower end before getting fresh clues from the PBOC's fix starting February 24.
Japan
Drivers: The powerful short squeeze that lifted yen for five consecutive sessions after the LDP's stunning electoral success ended last week. The US dollar held January's low near JPY152.00, which appears to be encouraging the re-establishment of yen shorts.
Data: Japan's high frequency data helps explain the slow pace of BOJ rate hikes. Tokyo's CPI, a harbinger for the national figures, will be reported at the end of the week. It peaked at 3.4% last April-May and finished the year at 2.0% before falling to 1.5% in January. That is the lowest since March 2022. The core rate peaked last May at 3.6% and was at 2.3% at the end of 2025. It eased to 2.0% in January. Japanese retail sales fell by an average of 0.4% a month in H2 25 after they rose by 0.3% on average a month in H1. January industrial production will also be reported at the end of the week. It fell by an average of 0.2% a month in H2 25 and rose an average 0.4% a month in H1 25. We learned last week, the tertiary sector activity (services) eased in December, and managed to eke out a monthly average in H2 25 of 0.1%. It grew by an average of 0.3% in the first half of the last year. January department store sales are not typically closely followed but reports of boycotts by Chinese tourists may have impacted.
Prices: The dollar stalled at JPY155.65 before the weekend, meeting the (61.8%) retracement objective of the decline from the February 9 high (~JPY157.75). With the Supreme Court decision, the dollar reversed lower and approached JPY154.75. A potentially bearish shoot star candle stick was left in its wake. Initial support is seen in the JPY154.00-35 range. The momentum indicators are oversold but have yet to turn convincingly higher.
UK
Drivers: Weaker labor earnings, and softer labor market, while price pressures moderated weighed on sterling in the firm US dollar environment. Sterling's rolling 30-day correlation with changes in the euro is above 0.85, the upper end of where it has been for the last couple of years. The swaps market boosted the chances of a rate cut next month and another one this year.
Data: The UK's economic data due in the coming days is largely downplayed by market participants. The CBI retail sales and the GfK Consumer Confidence typically have little impact. Given the political sensitivities, the byelection outcome on February 26 in the Gorton and Denton district will closely be watched. Labour previously held the seat, but its candidate appears well behind the Green candidate and UK Reform Party.
Prices: Sterling frayed the 200-day moving average in the second half of last week, but the combination of stronger UK data and the US Supreme Court decision helped lift sterling from around $1.3435 to $1.3520 ahead of the weekend. While initial resistance is in the $1.3530-40 area, the more important test may be around $1.3575. The momentum indicators are still falling and sterling did not close above its five-day moving average last week.
Canada
Drivers: The Canadian dollar is less sensitive to interest rate changes as it too seems continue to be in technical corrective phase. In this vacuum, the correlation with oil has become more robust over the past 30 sessions. The inverses correlation between changes in the USD-CAD exchange rate and the front-month WTI futures contract reached almost -0.45 last week, the most since October 2024. That said, for most of the H2 25, the correlation was positive, meaning that Canadian dollar itself moved in opposite as crude oil prices.
Data: There are two data points in the week ahead and they ae backloaded in the second half of the week. The Q4 current account will be reported on Thursday, February 26. Canada runs a modest current account deficit. It may have grown last year to about 1.3% of GDP from 0.5% in 2024. Before Covid, it was wider. It averaged about 2.75% of GDP in the five years before the pandemic. Part of the issue is that as the current account deficit grew, foreign demand for Canada's bonds and stocks slowed. In 2024, foreign investors bought about C$193 bln of Canada's financial assets. This fell to about C$132 bln last year. Canada reports December and Q4 GDP at the end of the week. The disruption from the US is palpable. After growing 2.6% at an annualized rate in Q3, the Canadian economy appears to have practically stagnated in Q4, if not worse. The monthly GDP contracted by 0.3% in October and was flat in November. Preliminary data prompted StatsCan to project 0.1% growth in December. Caution: The monthly data does not translate into the quarterly estimate.
Prices: The US dollar held on to marginal gains against the Canadian dollar before the weekend. Of the currencies reviewed here, the Canadian dollar looks the most vulnerable. The US dollar bulls do not appear to have given up on the CAD1.3700 area. A move above CAD1.3715-20 could signa a move into the CAD1.3760-CAD1.3800 area. There is a possible double bottom in place (~CAD1.3480-CAD1.3500) and the CAD1.37 area is the neckline. The measuring objective is back near the mid-January highs, around CAD1.39. The momentum indicators are rising from oversold territory.
Australia
Drivers: Commodity exposure and monetary policy divergence helped lift the Australian dollar to highest level in three years earlier this month. The market has already fully priced another hike in the middle of Q3 and a little more than a 1-in-4 chance of a third increase this year. Gold's earlier surge has ended, and it is now in a choppy consolidation. The rolling 60-day correlation between changes in the exchange rate and changes in gold is near a two-year high near 0.70.
Data: The futures market is pricing in more than an 80% chance of another hike by the Reserve Bank of Australian in May. This week's data is too far from the meeting to have much impact, but the reports will give a sense of the pressure. First, January CPI is due Wednesday. At 3.8% at the end of last year, Australia's inflation is the highest among G10 countries. It rose 4% at an annualized pace in Q4 25, slightly faster than in Q4 24. Second, at the end of the week, January private sector credit will be reported. It has been particularly robust, rising 0.7% a month on average in Q4 25. That is the strongest quarterly performance since Q2 22. The 7.7% year-over-year pace was the strongest since the end of 2022.
Prices: The Australian dollar nearly traversed last week's entire range ahead of the weekend. It did fall to a nine-session low near $0.7015 before recovering to $0.7090. The high for the week was set on Monday, a little closer to $0.7100. It settled well, even if below the previous session's high. Still, it settled above the 20-day moving average (~$0.7035) and above the five-day moving average (~$0.7065) for the first time in a week. The momentum indicators have curled lower, but even after the disappointing preliminary February PMI, the futures market continues to price in another hike and almost 50% chance of a third move this year.
Mexico
Drivers: Carry trade strategies continue to attract and reward peso longs. Mexico's 10-year dollar bond also is outperforming US Treasuries (-14 bp vs. -8 bp) since the end of last year, and the Bolsa is up nearly 10.9% in peso terms and almost 16.5% in for dollar-based investors. The Nasdaq is down and the S&P 500 is up less than 1%.
Data: Mexico has a busy week of economic reports. The week begins with another look at Q4 GDP. The initial estimate was for 0.8% growth quarter-over-quarter. It was the best since Q3 24 and followed a 0.30% contraction in Q3 25. Tuesday, February 24, sees CPI for the first half of the month. Price pressures remain elevated and with a recession averted, these two reports will reinforce ideas that the central bank is on an extended holding pattern. And with Q4 GDP in hand, the Q4 current account loses some interest. At the end of the week, the January trade figures are due. Mexico's trade story is interesting in that despite the disruption from the US and the appreciation of the peso, Mexico's $19.15 bln trade deficit in 2024 flipped to a $770 mln surplus last year. Exports rose 7.6% and imports rose by 4.4%.
Prices: The US dollar looked poised to correct higher against the Mexican peso. It flirted with the MXN17.30 area for the first time since February 6. However, the US Supreme Court decision sent the greenback to almost MXN17.11. The fentanyl-related tariffs were included in the court's verdict. The dollar's low in the middle of last week was almost MXN17.0865. We suspect the MXN17.00 will offer formidable support, especially given President Trump's threat to leave. Still, it is not clear, and the Supreme Court would likely have weigh-in, whether congressional approval is necessary.
Reviewed by Marc Chandler
on
February 21, 2026
Rating:
