Dollar Rises as Stocks Slide Boosts Liquidity Demand

Weakness in the euro and British pound also supports the dollar index

Published on Feb. 18, 2026

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The dollar index (DXY00) rose 0.55% to a 1-week high as a slide in stocks increased liquidity demand for the dollar. Weakness in the euro and British pound also contributed to the dollar's gains, with the currencies falling to 1-week lows. US economic data was mixed, with the Empire manufacturing survey and NAHB housing index missing expectations. However, comments from Chicago Fed President Austan Goolsbee suggesting potential interest rate cuts this year if inflation continues to ease provided some support for the dollar.

Why it matters

The dollar's strength has implications for global trade, as a stronger dollar makes US exports more expensive for foreign buyers and imports into the US cheaper. This can impact the trade deficit and the competitiveness of US businesses. The dollar's performance is also closely watched by investors and policymakers as an indicator of economic conditions and market sentiment.

The details

The rise in the dollar index was driven by a combination of factors, including increased liquidity demand amid the stock market slide, as well as weakness in the euro and British pound. US economic data was mixed, with the Empire manufacturing survey and NAHB housing index missing expectations, but comments from a Fed official suggesting potential interest rate cuts provided some support for the dollar. The dollar's strength also reflects divergent central bank policies, with the BOJ expected to raise rates while the Fed and ECB keep rates steady or cut them.

  • The dollar index (DXY00) rose 0.55% to a 1-week high on February 17, 2026.

The players

Austan Goolsbee

Chicago Fed President who warned that services inflation remains elevated, but there is potential for more interest rate cuts this year if inflation continues to return to the Fed's 2% target.

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What they’re saying

“A BOJ rate hike in March would entail risk, as it would be based on expectations, not confirmation, and the BOJ would likely raise interest rates in April when new economic data becomes available.”

— Seiji Adachi, BOJ Board member (Barchart)

The takeaway

The dollar's strength highlights the complex interplay of economic factors, including market sentiment, central bank policies, and trade dynamics. Investors and policymakers will closely monitor the dollar's performance as an indicator of broader economic conditions and the potential for future interest rate adjustments.