Dollar falls after Trump's tariffs ruled illegal

(MENAFN- Seven Media) 23 February 2026: A tentative rally in the US dollar was sharply reversed over the weekend after the US supreme court ruled most of Trump's tariffs illegal. The US president quickly reimposed a general 15% tariff for up to 150 days under a different and possibly sounder legal foundation, but for now US trade has been thrown into further chaos. Stock markets reacted very calmly and barely budged in response, a sign that the ruling had been at least partially priced in. Bonds, however, fell on concerns that the lost tariff revenue darkens the US fiscal picture. None of the market moves were dramatic, however, as markets expectantly await further action from the Trump administration.

Enrique DíazÁÁlvarez, Chief Economist at Ebury said: “Political risks are again front and center for currency markets. In addition to the court ruling and Trump's reaction, the increasingly likelihood of a US attack on Iran will focus markets attention this week. This will be a very quiet week on the macroeconomic front, with little news of note expected from the major economic areas. Aside from the Iran and tariffs headlines, it will be an unusually busy week for speeches from central bank officials, including the Fed, ECB and Bank of England.”

GBP
Economic news out of the UK last week was quite positive for Sterling. January core inflation overshot expectations, as did retail sales. The most positive aspect was the upward surprise in the PMI leading index of business activity. While these developments should provide support for the Pound, in the short term they will be overshadowed by political risks to the Labour government, most immediately a key by-election Thursday where one of its parliamentary seats is threatened.

EUR
The PMI business activity indices surprised mildly to the upside. Further evidence that the next ECB rate change will be a hike came from the fourth-quarter Eurozone negotiated wage survey, which saw wage increases rebound to an almost 3% annualized rate. The tariff news over the weekend overshadowed this, as the European Parliament is halting work on the trade treaty with the US until the chaos on the US side is resolved. The initial market reaction has been to buy the Euro, further signalling the common currency's consolidation as a safe haven during US policy turmoil.

USD
Macroeconomic and policy news was overshadowed by the tariff ruling on Friday, but it is worth noting that all the data supported Fed hawks last week. Durable orders, a raft of housing data and weekly jobless claims all came out stronger than expected. Furthermore, the minutes of the last Fed meeting were very hawkish and suggest that several FOMC members are close to considering hikes in the overnight rate. However dovish incoming Chair Warsh tries to be, he will have a difficult time dragging the rest of the voting members along. Of course, the fresh tariff chaos takes front and center now, but neither the US economy nor the Fed seems consistent with a significant rate-cutting cycle.

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