Dollar Falls on Expectations of Easier Fed Policy

Economic Indicators - The December Empire manufacturing survey unexpectedly contracted by 22.6 points to -3.9, significantly weaker than the expected 10.0 [3] - The NAHB housing market index for December rose by 1 to an 8-month high of 39, aligning with expectations [3] - Eurozone industrial production for October increased by 0.8% month-over-month, marking the largest rise in 5 months and meeting expectations [6] Federal Reserve Policy - The dollar index is down by 0.24% due to the contraction in the Empire manufacturing survey, which is seen as a dovish factor for Federal Reserve policy [1] - Fed Governor Stephen Miran indicated that the current policy stance is unnecessarily restrictive for the economy, citing a benign inflation outlook and labor market concerns [3] - There is a 27% chance that the FOMC will cut the fed funds target range by 25 basis points at the upcoming January meeting [4] Currency Movements - The euro (EUR/USD) is up by 0.23%, reaching a 2.5-month high, supported by dollar weakness and positive Eurozone industrial production data [5] - The yen (USD/JPY) is down by 0.60%, climbing to a 1-week high against the dollar due to stronger-than-expected Japanese economic indicators and expectations of a potential interest rate hike by the Bank of Japan [7] Market Sentiment - Concerns are growing that President Trump may appoint a dovish Fed Chair, which could negatively impact the dollar [2] - Markets are pricing in a 0% chance of a rate cut by the European Central Bank at the upcoming policy meeting, indicating a divergence in central bank policies between the Fed and the ECB [6]