Dollar Gains on Positive US Labor News and Higher Bond Yields

Group 1: Dollar Index and Economic Indicators - The dollar index (DXY00) reached a 1-week high, increasing by +0.25%, driven by rising T-note yields and a drop in weekly US unemployment claims to a 1-month low of 199,000, which was a decrease of -16,000 from previous figures [1][3] - The markets are currently pricing in a 15% probability of a -25 basis point rate cut at the upcoming FOMC meeting scheduled for January 27-28 [3] Group 2: Federal Reserve and Monetary Policy - Questions regarding the independence of the Federal Reserve are limiting the dollar's gains, particularly after President Trump suggested he might consider firing Fed Chair Powell [2] - The Federal Reserve is expected to cut interest rates by approximately -50 basis points in 2026, while other central banks like the Bank of Japan (BOJ) are anticipated to raise rates by +25 basis points in the same year [4] - The Fed's liquidity measures, including the purchase of $40 billion in T-bills monthly since mid-December, are exerting additional pressure on the dollar [5] Group 3: Euro and Market Sentiment - The EUR/USD pair fell to a 1-week low, decreasing by -0.21%, as the dollar's strength negatively impacted the euro, compounded by ongoing concerns regarding the Russian-Ukrainian war [6] - Market activity in the euro is subdued due to the New Year's holiday in Germany, with swaps indicating only a 1% chance of a +25 basis point rate hike by the European Central Bank (ECB) at its next meeting on February 5 [6]