Dollar Pushes Higher on Yen Weakness and Hawkish Fed Comments

Group 1: Dollar Index and Economic Indicators - The dollar index rose by +0.26%, supported by the yen's weakness, which fell to a 1.5-year low against the dollar [1] - US October new home sales fell -0.1% month-over-month to 737,000, which was stronger than the expected 715,000 [3] - US December core consumer prices were unchanged from November at +2.6% year-over-year, which was below the expected +2.7% [2][3] Group 2: Federal Reserve Policy and Market Expectations - The markets are pricing in a 3% chance of a -25 basis point rate cut at the upcoming FOMC meeting on January 27-28 [4] - The Federal Reserve is expected to cut interest rates by about -50 basis points in 2026, while the Bank of Japan is anticipated to raise rates by +25 basis points in the same year [4] - Concerns over Fed independence have arisen following comments from Fed Chair Powell regarding potential criminal charges related to his testimony, which may impact market sentiment [2][5] Group 3: Liquidity and Future Fed Chair Speculation - The Federal Reserve has begun purchasing $40 billion a month in T-bills to boost liquidity in the financial system [5] - President Trump is expected to announce his selection for the new Fed Chair in early 2026, with National Economic Council Director Kevin Hassett seen as the most dovish candidate [5]