Dollar Recovers and Gold Falls on Hawkish Fed Comments

Group 1: Dollar Index and Economic Indicators - The dollar index (DXY) recovered from a one-week low, finishing up by 0.01% due to hawkish comments from Federal Reserve officials [1] - The US Q4 employment cost index rose by 0.7% quarter-over-quarter, which was weaker than the expected 0.8% and marked the smallest increase in 4.5 years [3] - US December retail sales were unchanged month-over-month, falling short of expectations of a 0.4% increase, with retail sales excluding autos also unchanged [3] Group 2: Federal Reserve Commentary - Cleveland Fed President Beth Hammack indicated a preference for patience regarding interest rate adjustments, suggesting the Fed could remain on hold for an extended period [4] - Dallas Fed President Lorie Logan stated that significant weakness in the US labor market would be necessary for her to support further interest rate cuts [4] Group 3: Dollar Weakness and Market Sentiment - The dollar faced pressure as foreign investors withdrew capital from the US, influenced by a growing budget deficit and political polarization [5] - The swaps market is pricing in a 20% chance of a 25 basis point rate cut at the upcoming policy meeting on March 17-18 [5] - The dollar is expected to experience underlying weakness, with projections indicating a potential 50 basis point rate cut by the FOMC in 2026 [6]