Forex Today: US Dollar recovers modestly as markets assess latest headlines on Trump tariff policy

Here is what you need to know on Wednesday, February 26:

The US Dollar (USD) holds its ground against its rivals early Wednesday as markets adopt a cautious stance. The US economic calendar will feature New Home Sales data for January. Later in the American session, Atlanta Federal Reserve President Raphael Bostic and Richmond Federal Reserve President Thomas Barkin will be delivering speeches. 

Falling US Treasury bond yields after US Treasury Secretary Scott Bessen said that the Trump administration will find a way to reduce spending and ease monetary policy at the same time weighed on the USD on Tuesday. As the benchmark 10-year US T-bond yield fell more than 2% on the day, the USD Index lost about 0.4%. Early Wednesday, the 10-year yield stays in positive territory above 4.3% and the USD Index clings to recovery gains at around 106.50.

Meanwhile, US President Donald Trump's trade adviser, Peter Navarro, said that tariff negotiations are ongoing with Canada and Mexico and noted that they will set a reciprocal tariff for digital services tax. Additionally, Trump signed an executive order late Tuesday to launch an official probe into copper markets, specifically an investigation into pricing of futures and delivery markets, citing national security concerns.

EUR/USD rose more than 0.4% on Tuesday but lost its bullish momentum early Wednesday. At the time of press, the pair was trading marginally lower on the day, a few pips below 1.0500. Earlier in the day, the data from Germany showed that the GfK Consumer Confidence Index for March dropped to -24.7 from -22.6.

Following Monday's decline, GBP/USD registered small gains on Tuesday. In the European morning on Wednesday, the pair fluctuates in a tight channel at around 1.2650.

AUD/USD failed to benefit from the selling pressure surrounding the USD and closed in negative territory for the third consecutive trading day on Tuesday. The pair stays on the back foot early Wednesday and trades below 0.6350. In the Asian session, the data from Australia showed that the annual Consumer Price Index (CPI) rose 2.5% in January, matching December's increase.

USD/JPY lost nearly 0.5% on Tuesday and registered its lowest daily close since early October. The pair stages a rebound in the European morning on Wednesday and trades near 149.50.

Gold came under heavy selling pressure on Tuesday and lost more than 1% on the day. After touching its lowest level in over a week at $2,888, however, XAU/USD managed to erase a portion of its daily losses to close above $2,900. As of writing, the pair was moving up and down in a tight channel slightly above $2,910.