Dollar Triumphs on Wave of Hawkish Signals from Fed and Middle East Tensions

The American currency is showing exceptional strength in global markets, achieving performance not seen in four months. The main driver of the gains is a change in rhetoric from the Fed, whose representatives are increasingly distancing themselves from the possibility of easing monetary policy in the near term. The published minutes from the January meeting of the Federal Open Market Committee revealed that policymakers expect further evidence of a sustained decline in inflation before deciding to cut rates, which currently remain in the 3.50-3.75% range. An additional boost for the dollar came from labor market data – the number of new unemployment benefit claims in the US fell to 206,000, surprising analysts who had expected higher readings. The market situation is compounded by geopolitical uncertainty in the Middle East. President Donald Trump has set a short deadline for negotiations with Iran, which has driven up oil prices and prompted a flight of investors towards safe havens like the dollar and gold. The precious metal, despite temporary corrections, remains near the $5,000 per ounce barrier. A quite different situation prevails in Asia, where annual core inflation in Japan fell in January to 2.0% from the 2.4% level recorded in December. This is the lowest reading in two years, giving the Bank of Japan more time to decide on a potential departure from its ultra-loose monetary policy. Since the 2008 financial crisis, central banks worldwide have gone through a period of historically low interest rates, which fundamentally changed the dynamics of currency and commodity markets. In response to the strong dollar, other currencies lost ground, including the pound sterling, which slipped to 1.3483 USD, and the South African rand. In commodity markets, pressure is visible on copper, whose prices on the London LME exchange fell by 0.6% on a weekly basis. Investors are now anxiously awaiting further US inflation data, which could ultimately cement the 'higher for longer' scenario, meaning high interest rates maintained for an extended period. Experts from Invesco and Carmignac are already betting against Treasury bonds, seeing no justification for aggressive rate cuts in the face of the resilience of the US economy. „The labor market has performed slightly better than I expected over the last few months.” — Stephen Miran206 thousand — new unemployment benefit claims in the USChange in US 10-Year Treasury Bond Yield: 2026-02-17: 4.07, 2026-02-18: 4.08, 2026-02-19: 4.09Inflation in Japan (y/y): Core Inflation: 2.4% (December) → 2.0% (January)