Market Overview

Global markets opened February with aggressive cross-asset repricing after U.S. President Donald Trump nominated Kevin Warsh as the next Chair of the Federal Reserve. The move was widely interpreted as a shift toward a less-dovish and more disciplined monetary policy outlook, triggering a sharp reassessment of rate expectations, a surge in the U.S. dollar, and violent reversals across commodities.

The combination of a stronger dollar, rising Treasury yields, and improving U.S. macro data reinforced risk-off positioning, bringing directional conviction back into FX and commodity markets after weeks of extreme volatility.

Dollar Rallies as Fed Outlook Turns Less Dovish

The U.S. dollar strengthened broadly as markets repriced the Federal Reserve’s future policy trajectory following Warsh’s nomination. Investors viewed the appointment as reinforcing Fed independence and signaling resistance to aggressive rate cuts. This shift was amplified by a sharp upside surprise in U.S. ISM Manufacturing PMI, which returned to expansion territory and lifted yields across the curve.

Safe-haven flows accelerated into the dollar as commodities sold off, pushing the USD Index toward multi-week highs and pressuring major currency pairs.

Gold Suffers Violent Correction as Positioning Unwinds

Gold experienced one of its most severe corrections on record, extending a sharp selloff as rising yields and a firmer dollar undermined its near-term appeal. The move triggered widespread profit-taking and forced liquidations following an extremely crowded rally that had driven prices to record highs in late January.

While longer-term structural support for gold remains intact due to geopolitical risks and central bank demand, the near-term outlook has shifted decisively toward consolidation as positioning resets under tighter financial conditions.

Oil Slides as U.S.–Iran De-Escalation Erases Risk Premium

Crude oil prices fell sharply as signs of de-escalation between the United States and Iran reduced fears of immediate supply disruptions. January’s geopolitical risk premium was rapidly unwound after both sides signaled openness to negotiations, while OPEC+ reiterated production flexibility without committing to further cuts.

A stronger U.S. dollar and rising exports from alternative suppliers added further downside pressure, pushing WTI away from recent highs and reinforcing short-term bearish momentum.

FX Markets React to Dollar Strength and Political Risk

In foreign exchange markets, dollar strength dominated. EUR/USD fell decisively below 1.1800, while USD/JPY climbed back above 155.00 as yen weakness intensified amid Japanese election-related political rhetoric favoring a softer currency. Commodity-linked currencies also came under pressure, with USD/CAD rising as falling oil prices compounded USD demand.

Sterling traded defensively ahead of the Bank of England decision, holding key support levels but struggling to gain traction against a resurgent dollar.

Market Outlook

With central bank leadership changes, geopolitical developments, and critical labor and policy data converging, volatility is expected to remain elevated. Markets are shifting from speculative momentum toward macro-driven repricing, setting the stage for decisive follow-through across FX, commodities, and global indices in the days ahead.