Dollar Pulls Back as US Manufacturing Activity Contracts

Group 1 - The dollar index (DXY00) decreased by -0.16% after reaching a 3-week high, influenced by a contraction in the US Dec ISM manufacturing index, which fell by -0.3 to 47.9, marking the steepest decline in 14 months [1][3] - Geopolitical tensions in Venezuela initially increased safe-haven demand for the dollar, but subsequent market movements and comments from Fed officials led to a retreat in dollar value [2] - The Federal Open Market Committee (FOMC) is anticipated to cut interest rates by approximately -50 basis points in 2026, contributing to underlying weakness in the dollar [4] Group 2 - The Federal Reserve has started purchasing $40 billion in T-bills monthly since mid-December, which is increasing liquidity in the financial system and putting additional pressure on the dollar [5] - Concerns regarding President Trump's potential appointment of a dovish Fed Chair are also negatively impacting the dollar, with Kevin Hassett being viewed as the most dovish candidate [5]