US-Iran Tensions Hit 10-Day Deadline; USDX Rises Ahead of GDP and PCE

EUR/USD declined to its lowest level since January 23 on Thursday, pressured by renewed US Dollar strength following robust US economic data and fading expectations of near-term Federal Reserve rate cuts.

Fresh US labor market data reinforced the Dollar’s strength. Initial Jobless Claims for the week ending February 14 dropped to 206,000, significantly below the 225,000 consensus estimate and down from the previous week’s 229,000 reading. The four-week moving average edged lower to 219,000 from 220,000.

Manufacturing data also surprised to the upside. The Philadelphia Fed Manufacturing Survey jumped to 16.3 in February, exceeding expectations of 8.5 and improving from January’s 12.6.

Market attention now shifts to Friday’s US economic calendar, which includes the Core Personal Consumption Expenditures (PCE) Price Index — the Federal Reserve’s preferred inflation gauge — along with the advance estimate of fourth-quarter Gross Domestic Product and preliminary February Purchasing Managers’ Index (PMI) data.

Despite recent strong data, markets continue to price in nearly two interest rate cuts from the Federal Reserve this year. However, minutes from the January Federal Open Market Committee meeting signaled that policymakers are not in a rush to ease policy, as inflation remains above the central bank’s 2% target.

In contrast, the European Central Bank is widely expected to maintain current interest rate levels through 2026, reinforcing policy divergence between the US and the Eurozone.

Gold prices advanced for a third consecutive session on Friday, supported by escalating geopolitical tensions, though gains remain limited amid a firm US Dollar and cautious positioning ahead of key US economic data.

The precious metal continues to attract safe-haven demand, but investors appear reluctant to take aggressive positions before the release of the Advance fourth-quarter US Gross Domestic Product (GDP) report and the Personal Consumption Expenditures (PCE) Price Index.

Geopolitical risks intensified after Donald Trump warned Iran that it must reach an agreement over its nuclear program within 10 to 15 days or face serious consequences. In response, Iran informed António Guterres that while it does not seek conflict, it would respond decisively to any military aggression. Tehran also stated that bases and assets of hostile forces in the region would be considered legitimate targets if attacked.

The exchange has heightened concerns about a potential military confrontation and broader instability in the Middle East, providing underlying support to gold as investors seek safe-haven assets.

Despite geopolitical tailwinds, gold’s upside remains capped by expectations that US interest rates could stay elevated for longer.

With geopolitical tensions providing support and monetary policy expectations acting as a counterbalance, gold traders now turn their attention to the upcoming US GDP and PCE data.

Oil prices edged higher in Asian trading on Friday, building on strong gains from the previous two sessions and positioning benchmarks for an approximate 6% weekly surge, as rising tensions between the United States and Iran stoked concerns over potential supply disruptions in the Middle East.

Market sentiment has shifted sharply this week following renewed warnings from Donald Trump, who cautioned Tehran that “bad things” would follow if a nuclear agreement is not reached within 10 to 15 days. Reports suggest the US administration is weighing potential limited strikes on Iranian targets to increase pressure for a deal.

Any escalation involving Iran — a key member of OPEC — could threaten crude flows through the Strait of Hormuz, a vital shipping route that handles roughly one-fifth of global oil trade. The possibility of supply disruptions has reintroduced a geopolitical risk premium into oil markets.

Earlier in the week, crude prices had dipped on optimism surrounding potential diplomatic progress between Washington and Tehran.

Additional support came from fresh inventory data. The U.S. Energy Information Administration reported that US crude stockpiles fell by approximately 9 million barrels last week, sharply contrasting with expectations for a 1.7 million-barrel build.

Gasoline and distillate inventories also declined more than anticipated, suggesting solid demand from both refineries and end consumers. The unexpected drawdown reinforced the bullish tone in crude markets.

US equities ended Thursday’s session in negative territory after the latest Federal Reserve meeting minutes struck a more hawkish tone than markets had anticipated. Shares of Walmart also declined following the retailer’s first quarterly report under its new chief executive.

The pullback followed gains on Wednesday, when technology stocks rebounded and strength in Nvidia helped offset concerns stemming from the Fed’s policy outlook.

Minutes from the Federal Reserve’s January meeting revealed that nearly all participants in the Federal Open Market Committee (FOMC) supported the decision to keep interest rates unchanged.

However, the discussion underscored growing caution about the future policy path. Several officials signaled openness to additional rate hikes if inflation remains above the Fed’s 2% target, reinforcing the perception that policymakers are in no rush to resume easing.

Investors now turn their attention to Friday’s release of the Personal Consumption Expenditures (PCE) Price Index — the Fed’s preferred inflation measure — alongside a preliminary estimate of fourth-quarter US GDP growth. Both reports have the potential to materially shift expectations for monetary policy.

Walmart shares declined 1.4% after the retail giant reported quarterly results that topped expectations on both revenue and earnings, and announced a $30 billion share repurchase program.

However, the company issued conservative profit guidance for the current quarter and fiscal year 2027, which fell short of consensus forecasts. The results marked the first earnings report under CEO John Furner, who recently succeeded longtime chief executive Doug McMillon.