Dollar Recovers as Stocks Tumble

Group 1: Dollar Index and Market Reactions - The dollar index (DXY00) rose by +0.12% on Thursday, recovering from early losses due to increased liquidity demand following a sell-off in equity markets [1] - The dollar's initial decline was influenced by a smaller-than-expected drop in weekly US jobless claims and a larger-than-expected decline in January existing home sales, which pressured T-note yields [2][3] - The dollar remains under pressure as foreign investors withdraw capital from the US amid a growing budget deficit and political polarization [4] Group 2: Economic Indicators - US weekly initial unemployment claims fell by 5,000 to 227,000, indicating a slightly weaker labor market than the expected 223,000 [3] - January existing home sales fell by -8.4% month-over-month to a 16-month low of 3.91 million, which was weaker than the expected 4.5 million [3] Group 3: Interest Rate Expectations - The FOMC is expected to cut interest rates by about -50 basis points in 2026, while the Bank of Japan (BOJ) is anticipated to raise rates by +25 basis points in the same year [5] - Swaps markets are currently pricing in a 7% chance of a -25 basis point rate cut by the Fed at the next policy meeting on March 17-18 [4] - The euro fell by -0.04% as the dollar recovered, with the euro pressured by declining German bund yields [6]