Insights

The US dollar strengthened against most major currencies in February, declining only versus the Australian dollar and the Swiss franc. The rebound followed a strong January jobs report and hawkish Fed minutes, which showed some policymakers were open to discussing rate hikes if inflation remains elevated. President Donald Trump’s announcement of a 15% global tariff, after the Supreme Court of the United States ruled parts of earlier duties illegal, also raised concerns about persistent inflation and reduced expectations for rate cuts.

The Australian dollar led gains after hawkish remarks from the Reserve Bank of Australia and stronger January CPI data increased expectations of back-to-back rate hikes. Sterling weakened as investors raised bets on easing by the Bank of England following softer GDP and inflation figures. The yen declined after Japanese Prime Minister Sanae Takaichi secured a landslide victory in the February 8 snap election and outlined large fiscal spending plans, while signaling support for a weaker currency. The euro also eased after European Central Bank officials voiced concerns about its strength but maintained policy settings.

Gold rebounded above $5,000 after a margin hike-led flash crash at the Chicago Mercantile Exchange, supported by safe-haven flows amid tariff uncertainty and geopolitical tensions.

February began on a positive note for the strategy, as it was able to capture profits by effectively positioning around certain directional market moves. However, as the month progressed, market conditions shifted into a more pronounced sideways pattern. This environment reduced the effectiveness of our positioning, leading to the erosion of earlier gains and resulting in additional losses toward the end of the period.