Dollar dominates as oil, geopolitics and core PCE loom

Key takeaways

• The dollar remains supported

• Today’s core PCE and Q4 GDP releases are pivotal

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Yesterday's currency recap

USD extended its rally for a fourth straight session, marking its longest winning streak since early January. US jobless claims and the Philadelphia Fed survey surprised to the upside, though December trade data showed a wider deficit, leaving the overall picture somewhat mixed. Despite this, the dollar remains supported as rate markets continue to dial back what are seen as overly dovish Fed expectations, with Q4 GDP due today. Geopolitics also stayed in focus amid ongoing Middle East tensions and planned Russia-Iran naval exercises. Rising US-Iran tensions pushed oil to a six-month high, supporting US inflation expectations and helping drive the dollar toward its strongest week in four months. Safe-haven demand lifted gold and Treasuries, while risk-sensitive currencies such as AUD and NZD underperformed and JPY failed to benefit materially as higher oil prices reinforced USD strength.

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Today's GBP rates

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*Daily move - against G10 rates as of 17:00 GMT, 19.02.26

** Indicative rates - interbank rates as of 17:00 GMT, 19.02.26 

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Key data points

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What we think

Today brings a heavy slate of data across Europe and the US, setting up a potentially volatile session. Flash PMIs from the eurozone and UK will provide an early read on February activity, crucial for EUR and GBP direction following recent softness. In the UK, stronger-than-expected retail sales have prompted markets to slightly trim Bank of England rate-cut expectations. While a first cut remains almost fully priced by April and a second is still expected later in the year (with roughly a 60% probability by July), the data introduces some caution around the improving inflation trend. For GBP, the modest pullback in aggressive easing bets is mildly supportive near term, though upside may remain limited while the broader easing cycle narrative stays intact.

The main focus will be the US releases at 1:30pm, including Core PCE, Q4 GDP, personal income and spending, followed by flash US PMIs. With the dollar already supported by firm activity data, firmer inflation expectations and reduced prospects for near-term Fed cuts, further upside surprises in growth or inflation could extend USD gains. Conversely, softer prints may trigger consolidation and positioning adjustments, though geopolitical risk and elevated oil prices continue to bias broader FX flows toward dollar outperformance unless tensions meaningfully ease.

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