The North American market took the dollar lower on Tuesday, and there was little follow through selling. Yesterday, the dollar as bid in North America and rather than resist, European more than Asia Pacific operators have extended the greenback’s gains. The somewhat more hawkish FOMC minutes sat the US two-year yield recover to session highs yesterday and a little bit more today. However, near 4.47%, the yield remains below last week’s high (~4.51%) ahead of today’s data.
There are two other large considerations. First, despite the talks, the market is on edge about a possible US strike on Iran. March WTI is up 1.7% today after yesterday’s 4.6% advance. It is near last month’s high (~$66.50). Second, tomorrow is a decision day for the US Supreme Court. It does not pre-announce which cases have been decided, but there is a chance of a verdict on the president’s use of emergency powers to tariff.
Prices
G10
• Yesterday, the euro traded marginally on both sides of Tuesday’s trading range and settled below its low. The bearish outside down day saw the euro fall to almost $1.1780 yesterday. It was unable to resurface above $1.1810 and slipped to nearly $1.1775 in late European morning turnover. The low set earlier this month was around $1.1765, and a break could spur another cent decline.
• The dollar rose almost 1% against the yen yesterday, which is its biggest advance of the month. Recall that it fell every day last week, defying expectations for a weaker yen coming out of the stunning LDP victory and subsequent rally in JGBs. The JPY154.90 area was a in approached in North America. The gains were extended to almost JPY155.35 before sellers emerged and took the greenback to almost JPY154.60 in the European morning. The intraday momentum indicators are overextended, suggesting limited downside in early North American activity.
• Sterling traded mostly inside Tuesday’s 1 1/3-cent range yesterday, but it traded heavily. It fell to almost $1.3465 today, having been unable to rise above $1.3520. The intraday momentum indicators are stretched, suggesting a bounce in early North American turnover. The next area of support is seen in the $1.3440-60 area.
• The Canadian dollar looks vulnerable. It posted its lowest settlement in nearly two weeks. The greenback pushed against CAD1.37 yesterday as it enjoyed a good bid in the North American afternoon. It rose to CAD1.3705 today but is consolidating in the CAD1.3670-CAD1.3690 area in Europe. The greenback needs to overcome the CAD1.3725 area to signal a move toward CAD1.3760-CAD1.3800.
• The Australian dollar traded quietly and softly yesterday. It spent most of the session confined to about a third of a cent above $0.7050 before breaking down to $0.7035 in the North American afternoon. This held with the help of a robust jobs report today. Still, the market was reluctant to push the Aussie above $0.7080. Meanwhile, a break of $0.6990-$0.7000 would signal an outright correction rather than consolidation, with downside potential for 1-1.5 cents.
EM
• The US dollar was sold to nearly MXN17.0865, a new low since mid-2024 in Europe yesterday. It traded below MXN17.10 in early North American turnover, where dollar buyers emerged and set the greenback to MXN17.24. It traded a little above MXN17.25 today. Nearby resistance is seen in the MXN17.27-28 area.
• After strengthening on Monday, the offshore yuan continues to trade quietly in the range set then (~CNH6.8810-CNH6.9060). The dollar traded to CNH7.9040 today, while holding above CNH6.89.
• Foreign investors have bought Indian equities this month but sold nearly twice the amount last month. Equity buying may be helping steady the rupee. The dollar is trading between INR90.07 and INR90.85 this month after reaching a record high late last month near INR92.0165.
Other Markets
• China, Hong Kong, and Taiwanese equity markets remains closed for the extended holiday. Japan’s Topix was up more than 1%, while the Nikkei lagged. South Korea’s Kospi jumped 3%. India’s indices are off nearly 1.5%. Europe’s Stoxx 600 is off around 0.7% and is threatening to snap a three-day advance. US index futures are off 0.25%-0.35%.
• Benchmark 10-year yields are mostly higher. Japan’s 10-year bond yield is a little firmer after a mild reception to its 20-year bond sale today. European yields are 1-2 bp higher and the 10-year US Treasury yield is up a basis point to 4.09%.
• Gold is straddling the $5000 area and is in a narrow range. It settled near $5042 at the end of last week and has stalled today near $5022. Silver is firm and reached a five-day high near $79.50 before consolidating.
• Fear that US and Iran are still edged toward conflict has helped lift March WTI above $66. Recall that Tuesday’s low was slightly below $62. The high from late January was almost $66.50.
Data
• The US reports the December trade deficit today. It may surprise some, but through November the US recorded a larger trade deficit in 2025 than it did in the same period in 2024 (~$872.51 bln vs $806.58 bln). In fairness, the trade deficit in the seven months after “Liberation Day”, the trade shortfall was reduced to $393.44 bln from $554.49 bln in the May-November 2024. The trade (and inventory) data will help economists fine-tune forecasts for Q4 GDP that is released on Friday. The Philadelphia Fed’s February business outlook often sees a market reaction to the headline. It is expected to have softened from the 12.6 reading in January. Weekly jobless claims are due at the same time. A little later, December Leading Economic Indicators are due but have lost whatever heft they may have had given that they have been warning of a recession for some time. The last time the index rose was in November 2024, which itself was the first time since February 2024. Today, the Fed’s Bowman, Bostic, Kashkari, and Goolsbee speak. The implied yield of the December 2026 Fed funds futures is about 3.05%. The current average effective rate, which is what the contract settles at, is currently 3.64%.
• Canada reports December merchandise trade balance today. In the January-November period, Canada recorded a deficit of about C$30.57 bln compared with a shortfall of C$8.9 bln in the first 11 months of 2024. In the seven months since the US “Liberation Day”, Canada recorded a trade deficit of almost C$24 bln compared with a slightly more than C$7bln short fall in the same 2024 period.
• Minutes from the recent meeting of Mexico’s central bank will be released today. Banxico appears to have signaled an extended pause, but it held out the possibility of resuming the easing cycle later this year.
• With Q4 GDP already reported, the eurozone’s December current account and construction output had minimal impact. The eurozone’s current account surplus narrowed by almost 40% last year. Construction output has yet to register the infrastructure spending. It was largely unchanged last year after a flat 2024.
• After the UK’s jobs and inflation reports over the past two sessions, today’s CBI order book data for February had negligible impact.
• Australia created almost 18k jobs in January. Full-time positions increased by 50.5k after a 56.8k jump in December. The participation rate was steady at 66.7%, which is about 0.6% below the record high set last January. Defying expectations, the unemployment rate held steady at 4.1%. The futures market increased the odds of a May hike to almost 85% from a little less than 80% yesterday.
Reviewed by Marc Chandler
on
February 19, 2026
Rating:
