Dollar Little Changed and Precious Metals Plunge on Long Liquidation Pressures

Currency Market Overview - The dollar index (DXY00) is down slightly by -0.03%, reversing an early advance due to a decline in the Dallas Fed manufacturing outlook [1] - The dollar initially gained strength from stock market weakness, which increased liquidity demand, but later weakened after disappointing manufacturing data [1] Economic Indicators - US November pending home sales rose by +3.3% month-over-month, surpassing expectations of +0.9% [5] - The Dallas Fed manufacturing outlook for December unexpectedly fell by -0.5 to -10.9, against expectations of an increase to -6.0 [5] Federal Reserve and Interest Rates - Markets are pricing in a 19% chance of a -25 basis point rate cut at the FOMC's next meeting on January 27-28 [2] - The Federal Reserve is expected to cut interest rates by about -50 basis points in 2026, contributing to the dollar's underlying weakness [3] Global Central Bank Actions - The Bank of Japan (BOJ) is expected to raise rates by +25 basis points in 2026, while the European Central Bank (ECB) is anticipated to keep rates unchanged [3] - Swaps indicate a 0% chance of a +25 basis point rate hike by the ECB at the next policy meeting on February 5 [7] Market Sentiment and Future Outlook - Concerns regarding President Trump's potential appointment of a dovish Fed Chair are putting additional pressure on the dollar, with Kevin Hassett seen as the most likely candidate [4] - The Fed's recent actions to boost liquidity, including purchasing $40 billion a month in T-bills, are also contributing to the dollar's weakness [4]