Dollar Gains on Hawkish Fed (02.20.2026)

The dollar index rose toward 98, set for a about 1% weekly gain as strong US data and hawkish Fed signals outweighed a wider trade deficit and softer housing data.

Global markets leaned defensive as hawkish Federal Reserve signals and political uncertainty in Europe lifted the US dollar and weighed on major currencies. The euro slipped to a two-week low amid reports that ECB President Christine Lagarde may step down early, adding leadership risk to an already cautious policy outlook. The Japanese yen weakened past 155 as softer inflation data reduced pressure on the Bank of Japan to tighten further.

In commodities, gold stabilized near the $5,000 mark as investors balanced rising Middle East tensions against resilient US economic data and reduced near-term rate-cut expectations. Sterling softened after UK inflation fell sharply, strengthening the case for Bank of England easing, while silver held above $78, supported by geopolitical risk despite lingering volatility and light holiday trading.

Euro Dips on Hawkish Fed, Exit Rumors

The euro fell below $1.18, hitting its lowest level in two weeks as the dollar rallied on hawkish Federal Reserve signals. FOMC minutes revealed internal divisions, suggesting significant hurdles for future U.S. rate cuts. Meanwhile, European markets reacted to reports that ECB President Christine Lagarde may resign before France’s 2027 election, potentially allowing current leaders in Paris and Berlin to choose her successor. Combined with the June departure of Bank of France Governor François Villeroy de Galhau and stable Eurozone inflation, the ECB is now expected to hold rates steady through 2026.

For EUR/USD, the initial resistance is seen at 1.1820, while the closest support is positioned at 1.1750.

Yen Weakens Past 155

The Japanese yen fell beyond 155 per dollar on Friday, marking its third consecutive day of losses. This decline followed January data showing both headline and core inflation cooled significantly due to government cost of living subsidies. Headline inflation dropped to 1.5%, its lowest level since March 2022, while core inflation eased to the Bank of Japan's 2% target, the slowest pace in two years.

Technically, resistance stands near 156.70, while support is firm at 153.50.

Gold Stabilizes Near $5,000

Gold prices held steady near $5,000 per ounce on Friday as investors balanced heightened geopolitical tensions with a resilient U.S. economy. Friction between the U.S. and Iran escalated following President Trump’s ten-day deadline for nuclear negotiations and a massive Middle East military buildup. Meanwhile, Fed Governor Stephen Miran tempered expectations for immediate rate cuts, citing strong data like last week’s surprise drop in jobless claims to 206K. All eyes now turn to today’s PCE inflation report for further policy direction.

Gold sees support near $4920, while resistance is around $5010.

Pound Weakens as Inflation Tumbles

Sterling dipped below $1.36 as cooling inflation data reinforced expectations for Bank of England rate cuts. UK headline inflation fell to 3.0% in January, its lowest in nearly a year, while core inflation reached its weakest level since 2021 at 3.1%. These figures follow disappointing labor data, including rising unemployment and slowing wage growth. Markets have now fully priced in a quarter-point rate cut by April, with high probabilities of a move as early as March.

From a technical view, support stands near 1.3360, with resistance around 1.3520.

Silver Stabilizes Above $78

Silver held above $78 on Friday, positioning for its first weekly gain in a month. Prices found support from escalating U.S.-Iran friction after President Trump issued a 15-day ultimatum for a nuclear deal and Iran hinted at retaliation against U.S. bases. Trading volumes remained light as major Asian markets stayed closed for the Lunar New Year. This stability follows a period of extreme volatility, where a speculative Chinese-led rally was met with a sharp reversal. Investors now await further U.S. data and Fed signals, as policymakers remain divided on whether high inflation might necessitate further interest rate hikes.

From a technical view, resistance stands near $78.50 while support is located around $73.80.