Dollar Rises Alongside T-Note Yields

Group 1: Dollar Index and Economic Indicators - The dollar index (DXY00) rose by +0.30% but remained below Monday's 3.5-week high, supported by higher T-note yields and comments from Richmond Fed President Tom Barkin regarding expected tax cuts and deregulation to boost growth this year [1] - The US December S&P services PMI was revised downward by -0.4 to 52.5 from the previously reported 52.9, indicating a slight weakening in service sector activity [3] - The markets are currently pricing in an 18% chance of a -25 basis point rate cut at the FOMC's next meeting on January 27-28, reflecting market expectations for monetary policy adjustments [4] Group 2: Fed Policy and Interest Rates - Fed Governor Stephen Miran indicated that Fed policy is "clearly restrictive" and suggested that more than 100 basis points of rate cuts are justified this year, highlighting a potential shift in monetary policy [4] - The dollar is under pressure as the Fed is expected to cut interest rates by about -50 basis points in 2026, contrasting with expectations for the Bank of Japan to raise rates by +25 basis points in the same year [5] - Concerns about President Trump's potential appointment of a dovish Fed Chair, likely to be National Economic Council Director Kevin Hassett, are contributing to bearish sentiment for the dollar [6] Group 3: Geopolitical Factors - The dollar retains some safe-haven support due to escalating geopolitical risks in Venezuela, particularly following the US capturing Venezuelan President Maduro and President Trump's comments about temporarily "running" Venezuela [1]