- Currency futures start the week on a positive note, with the dollar sliding amid tariff uncertainty and weaker US growth data.
- Euro, Pound, Yen, and CAD futures gain as their counterparts face pressure due to central bank divergence.
- Moving ahead, market participants await the US PPI and Fed communication, other than tariff and Iran-related headlines.
On Monday, the currency futures recovered as the US Dollar Index (DXY) futures fell for the second day in a row amid a weak and uncertain US trade policy. The Dollar Index (DXY) hovered near 97.50 in Asian trading after settling at 97.79 on Friday, down 0.13% on the session. The move followed a US Supreme Court ruling that President Donald Trump exceeded his authority in imposing sweeping global tariffs under the International Emergency Economic Powers Act (IEEPA).
Although the administration quickly unveiled a new 15% global tariff framework under alternative statutes, the ruling injected fresh uncertainty into the policy outlook, prompting a sell-off in the greenback across futures markets.
Euro FX futures (6E) extend gains from near one-month lows around 1.1750 to trade above 1.1830. The dollar’s retreat was amplified by weaker US growth data last week. The Q4 GDP expanded at an annualized 1.4%, sharply below the prior quarter’s 4.4% pace and market expectations.
At the same time, core Personal Consumption Expenditures (PCE) inflation rose 3.0% YoY, complicating the Fed’s policy path. While sticky inflation supports a cautious stance from policymakers, traders continue to price in a higher probability of a rate cut in June and at least two 25-bps reductions in 2026, pressuring front-end dollar futures.
Meanwhile, Sterling futures (6B) edged higher, above 1.3500, supported by stronger-than-expected UK PMI and retail sales data. However, volatility expectations remain elevated ahead of the US Producer Price Index (PPI) data due later this week.
In commodity-linked currencies, Canadian dollar futures (6C) firmed modestly. Traders balanced tariff uncertainty against oil market dynamics, with geopolitical tensions resurfacing after reports that the US is weighing potential military action against Iran. As Canada is a major crude exporter, sustained energy price strength could lend support to the loonie.
At the same time, yen futures (6J) gained slightly on Monday as investors became even more risk-averse after the new tariff announcement, which raised concerns about retaliation and supply chain disruptions. However, the yen’s rise was slowed by expectations that the Bank of Japan would remain cautious following softer domestic inflation data.
Market participants are now looking to upcoming US data releases, like the Chicago Fed National Activity Index and the January PPI, as well as Federal Reserve communication and President Trump’s State of the Union address, for guidance.
For now, currency futures markets reflect a repricing of US policy risk, with the dollar trading defensively amid legal constraints on tariffs and mounting questions over growth momentum.
