Dollar Tumbles as Fed Boosts Liquidity

Group 1: Dollar Index and Economic Indicators - The dollar index (DXY00) fell to a 1.75-month low, down by -0.55%, influenced by the FOMC's decision to cut the federal funds target range by -25 basis points and increase liquidity through $40 billion monthly T-bill purchases [1] - US weekly jobless claims rose by +44,000 to a 3-month high of 236,000, indicating labor market weakness, which is dovish for Federal Reserve policy [4] - The US September trade deficit unexpectedly shrank to -$52.8 billion, the smallest in 5.25 years, contrasting with expectations of a widening to -$63.1 billion [4] Group 2: Market Reactions and Future Expectations - The markets are pricing in a 24% chance of another -25 basis point cut in the federal funds target range at the upcoming FOMC meeting on January 27-28 [4] - Concerns about President Trump's potential appointment of a dovish Fed Chair have added bearish sentiment towards the dollar, with Kevin Hassett being viewed as the most dovish candidate [3] Group 3: Euro and Yen Performance - The euro (EUR/USD) rose to a 2.25-month high, up by +0.46%, supported by dollar weakness and positive comments from ECB President Lagarde regarding potential economic growth forecast increases [5] - The yen (USD/JPY) decreased by -0.60%, benefiting from a weaker dollar and improved business confidence in Japan, with Q4 BSI large manufacturing confidence reaching a 1-year high [6]