Dollar Edges Higher on US Economic News and FOMC Minutes

Core Insights - The dollar index rose to a one-week high, supported by positive US economic data and hawkish FOMC meeting minutes [1][4] - Concerns regarding the Fed's independence and a strong Chinese yuan are limiting the dollar's gains [2] Economic Indicators - The US October S&P Case-Shiller composite-20 home price index increased by +0.3% month-over-month and +1.3% year-over-year, surpassing expectations [3] - The US December MNI Chicago PMI rose by +9.2 to 43.5, also exceeding expectations [3] Federal Reserve Insights - The December FOMC meeting minutes were neutral to slightly hawkish, indicating that some policymakers support holding interest rates steady while others see potential for future cuts if inflation declines [4] - The market currently estimates a 16% chance of a -25 basis point rate cut at the next FOMC meeting scheduled for January 27-28 [4] Interest Rate Expectations - The dollar is expected to face underlying weakness as the FOMC is projected to cut interest rates by approximately -50 basis points in 2026, while the Bank of Japan is anticipated to raise rates by +25 basis points [5] - The European Central Bank is expected to maintain current rates in 2026 [5] Liquidity and Leadership Concerns - The dollar is under pressure due to the Fed's liquidity measures, including the purchase of $40 billion in T-bills monthly since mid-December [6] - Speculation about President Trump's potential appointment of a dovish Fed Chair is contributing to bearish sentiment for the dollar, with Kevin Hassett being viewed as a likely candidate [6]