Weekly market wrap: data supports the US dollar amid a hit from the court

It was a week full of surprises that culminated on its final day, leaving global financial markets ending their sessions in an unexpected manner given the political and economic developments that unfolded throughout the period. This weekly summary reviews the most important events that shaped the landscape.

Sources of Uncertainty

Persistent uncertainty over geopolitical tensions and other negative factors weighing on markets continued to dominate trading last week, which negatively affected risk assets, especially global equities.

Economic data also contributed to the pressure on US stocks, as it highlighted improvements in the US labor market.

Stock markets came under further pressure after the release of the Federal Reserve’s minutes from the 27–28 January meeting, which indicated that some policymakers believe interest rates should be raised if inflation remains above target.

These signals increased investor caution, especially amid ongoing uncertainty about the future path of US monetary policy.

The Fed’s inclination in its latest meeting to keep interest rates unchanged for the foreseeable future was also a major factor weighing on US equities, as current rate levels are generally unfavorable for stock investment.

Geopolitical Pressures

On the geopolitical front, risk assets faced additional pressure after statements from the International Atomic Energy Agency warning that escalating US military action in the Middle East could close the window for a diplomatic agreement with Iran over its nuclear program.

Iran’s temporary closure of parts of the Strait of Hormuz — one of the world’s most vital oil supply routes — also negatively affected stock market movements for more than two days.

In addition, equities were pressured by the failure of talks between Russia and Ukraine to achieve meaningful progress, prompting Ukrainian President Volodymyr Zelensky to accuse Russia of slowing efforts toward an agreement.

There were also non‑geopolitical concerns after headlines suggested that Christine Lagarde, President of the European Central Bank, intended to “resign” before the end of her term, sparking anxiety about the ECB’s current policy direction.

A report in the Financial Times indicated that Lagarde plans to leave her position before her term ends in October 2027, causing market confusion and adding pressure on the euro.

Lagarde is viewed as a moderate voice who has helped maintain monetary stability in the eurozone in recent years, so talk of her early departure raised concerns about the ECB’s future direction at a time when the economy is clearly slowing.

US Economic Data

US weekly jobless claims fell to 206,000 last week — a decline that reflects continued labor market strength despite weakness in other economic indicators.

This level is near historical lows, suggesting companies remain reluctant to lay off workers and that labor demand remains relatively strong.

The decline came as investors closely monitor labor data to assess the impact of the Fed’s tight monetary policy. With interest rates remaining high, the labor market was expected to show clearer signs of weakness, yet recent data suggests the economy is still absorbing pressure without major deterioration in employment.

The US trade deficit for December widened to $70.3 billion, the largest in five months, while the Philadelphia Fed manufacturing index for February unexpectedly rose to a five‑month high of 16.3.

Readings of the Personal Consumption Expenditures (PCE) index — the Fed’s preferred inflation gauge — exceeded market expectations. Core PCE, excluding food and energy, also came in higher than expected, suggesting the Fed may keep interest rates unchanged in the coming period.

Economic data showed US GDP for Q4 rose only 1.4%, compared with expectations of 2.8%. Core PCE rose 2.7%, above the 2.6% forecast.

Meanwhile, personal spending for December rose 0.4%, and personal income increased 0.3%, both in line with expectations.

The February manufacturing PMI fell to 51.2, below expectations of 52.4. New home sales dropped 1.7% to 645,000 units, below the 730,000 expected.

The University of Michigan consumer sentiment index for February was revised down to 56.6, below the expected 57.3, while one‑year inflation expectations fell to 3.4%, the lowest in 13 months.

Last‑minute Optimism

The US Supreme Court ruled to overturn a large portion of the tariffs imposed by the Trump administration on many of the United States’ trading partners.

The ruling is unprecedented and places the White House in a difficult position regarding the revenue generated by those tariffs — revenue Trump had repeatedly boasted would flow into the US Treasury.

The halt of tariff revenue flows will put the federal government — especially the US Treasury — in a difficult situation, as it will widen the federal budget deficit.

Economically, this deficit — occurring amid a wave of foreign investment withdrawals from the US — weakens the position of the US dollar and its key assets, particularly US Treasury bonds, which the US relies on for financing needs.

This could reduce the attractiveness of these assets to global investors and weaken the government’s ability to meet financial requirements.

Politically, the Supreme Court’s decision — which halts tariff revenue — poses significant risks on multiple levels.

The loss of this revenue represents a deviation from President Donald Trump’s economic agenda, potentially weakening his popularity and placing his administration in a broader political dilemma if other courts issue rulings overturning decisions in areas such as immigration.

The ruling also threatens political stability in the country, as a widening budget deficit could fuel further clashes between Republicans and Democrats over the debt ceiling and government funding.

On Friday, the Supreme Court ruled to invalidate a large portion of the tariffs imposed by President Donald Trump, stating that the law used by the administration “does not authorize the president to impose tariffs.”

The decision passed with a 6–3 majority. Chief Justice John Roberts wrote the majority opinion, while Clarence Thomas, Samuel Alito, and Brett Kavanaugh wrote dissenting opinions.

The International Emergency Economic Powers Act (IEEPA) allows the president to regulate certain foreign transactions after declaring a national emergency to address “unusual and extraordinary threats.”

Although the IEEPA does not explicitly mention tariffs, the Trump administration argued that the authority to “regulate imports” grants the president the power to impose duties on foreign goods.

Trump also overstated the expected revenue, claiming the US “would receive more than $600 billion in tariffs,” while the Bipartisan Policy Center estimated total 2025 tariff revenue at around $289 billion. US Customs and Border Protection reported collecting about $200 billion between 20 January and 15 December.

Tariffs imposed specifically under the IEEPA generated about $129 billion in revenue as of 10 December.

The week ahead

Investors are turning their attention this week to a series of major economic and financial events, most notably the earnings report from Nvidia—the world’s most valuable company—alongside President Donald Trump’s State of the Union address. These developments come at a time when the U.S. economy is showing signs of slowing, while uncertainty surrounding the future path of monetary policy continues to grow.

Nvidia’s quarterly results, scheduled for release on Wednesday, are among the most influential potential market drivers. The company has played a central role in last year’s surge in artificial intelligence investments, and its previous reports were a major catalyst for this trend. Investors are closely watching comments from CEO Jensen Huang regarding the rising demand for Nvidia’s AI‑focused chips, as well as any updates on how the company is navigating restrictions on access to the Chinese market.

President Donald Trump will deliver his State of the Union address on Tuesday, just days after the Supreme Court struck down a significant portion of his tariff policies. Trump is expected to use the speech to outline his response to the ruling and present his vision for upcoming economic policies, including housing market reforms and tax measures.

With inflation continuing to ease and the labor market remaining resilient, investors are also awaiting remarks from Federal Reserve officials this week—most notably Christopher Waller, one of the strongest advocates for faster interest‑rate cuts. These comments are likely to highlight the ongoing division within the Fed over the timing and scale of potential rate reductions. Several other Fed officials are also scheduled to speak, which may offer additional clues about the central bank’s policy direction.

This week’s data releases include the home price index, which reflects mounting affordability pressures as housing prices remain elevated. On Friday, wholesale inflation data will be published, following recent consumer inflation reports that showed a sharper‑than‑expected slowdown in price pressures.