Dollar Gains on Strong US Economic News and Hawkish Fed Comments

Core Insights - The dollar index reached a 6-week high, increasing by +0.26% due to positive US economic data and hawkish comments from Federal Reserve officials [1][4] Economic Indicators - Weekly jobless claims fell by -9,000 to a 6-week low of 198,000, contrary to expectations of an increase to 215,000, indicating a stronger labor market [3] - The January Empire manufacturing survey rose by +11.4 to 7.7, surpassing expectations of 1.0 [3] - The January Philadelphia Fed business outlook survey increased by +21.4 to a four-month high of 12.6, exceeding expectations of -1.4 [3] Federal Reserve Commentary - Atlanta Fed President Raphael Bostic emphasized the need for a restrictive monetary policy due to anticipated inflation pressures continuing through 2026 [4] - Kansas City Fed President Jeff Schmid expressed a preference for maintaining a modestly restrictive monetary policy given ongoing inflation pressures [4] - The market currently estimates a 5% chance of a -25 basis point rate cut at the upcoming FOMC meeting on January 27-28 [4] Future Expectations - The dollar is expected to face underlying weakness as the FOMC is projected to cut interest rates by approximately -50 basis points in 2026, while the Bank of Japan is anticipated to raise rates by +25 basis points [5] - Concerns regarding President Trump's potential appointment of a dovish Fed Chair could further pressure the dollar, with speculation that National Economic Council Director Kevin Hassett is the leading candidate [6]