Dollar Gains on Yen Weakness and Hawkish Fed Comments

Group 1 - The dollar index (DXY00) increased by +0.23%, supported by a decline in the yen, which reached a 1.5-year low against the dollar [1] - US October new home sales fell by -0.1% month-over-month to 737,000, which was better than the expected 715,000 [3] - St. Louis Fed President Alberto Musalem indicated that the US economy is robust and anticipates above-potential growth, suggesting that an accommodative stance from the Fed is unnecessary [3] Group 2 - US December core consumer prices remained unchanged from November at +2.6% year-over-year, which was below the expected +2.7% [2][3] - The market is pricing in a 3% chance of a -25 basis point rate cut at the upcoming FOMC meeting on January 27-28 [4] - The Fed has started purchasing $40 billion a month in T-bills since mid-December, which is contributing to dollar pressure [5] Group 3 - Concerns regarding Fed independence have emerged after Fed Chair Powell faced threats of criminal charges related to his testimony, which may impact dollar strength [2] - President Trump is expected to appoint a dovish Fed Chair, with National Economic Council Director Kevin Hassett being the likely candidate, which could be bearish for the dollar [5]