Group 1: Dollar Index and Economic Indicators - The dollar index (DXY00) fell to a 2-week low, closing down by -0.79% due to fears of trade confrontations between the US and European allies [1] - The Federal Open Market Committee (FOMC) is anticipated to cut interest rates by approximately -50 basis points in 2026, contributing to the dollar's underlying weakness [3] - The Federal Reserve has increased liquidity in the financial system by purchasing $40 billion a month in T-bills since mid-December, further pressuring the dollar [4] Group 2: European Economic Data - The euro (EUR/USD) rose to a 3-week high, finishing up by +0.63%, driven by dollar weakness and positive economic expectations from Germany [5] - The German ZEW survey expectations for economic growth increased by +13.8 to a 4.5-year high of 59.6, surpassing expectations of 50.0, which is bullish for the euro [5] - German December Producer Price Index (PPI) fell by -2.5% year-on-year, which was weaker than the expected decline of -2.4% year-on-year, marking the steepest decline in 20 months [6]

Group 1 - The dollar index (DXY00) fell by -0.27% due to threats to the Federal Reserve's independence following comments from Fed Chair Powell regarding potential criminal charges from the Justice Department [1][2] - The markets are currently pricing in a 5% chance of a -25 basis point rate cut at the upcoming FOMC meeting on January 27-28 [2] - The Federal Reserve is expected to cut interest rates by approximately -50 basis points in 2026, contrasting with the Bank of Japan's expected +25 basis point increase and the European Central Bank's anticipated unchanged rates [3] Group 2 - The dollar is under pressure as the Fed increases liquidity by purchasing $40 billion a month in T-bills, which began in mid-December [4] - Concerns regarding President Trump's potential appointment of a dovish Fed Chair are contributing to bearish sentiment for the dollar, with Kevin Hassett being viewed as the most dovish candidate [4] - The euro (EUR/USD) rose by +0.29% as threats to the Fed's independence weakened the dollar, while the Eurozone's January Sentix investor confidence index increased to a 6-month high of -1.8, surpassing expectations [5]

Core Viewpoint - The dollar index is experiencing a decline due to threats to the Federal Reserve's independence, particularly following comments from Fed Chair Powell regarding potential criminal charges from the Justice Department related to his testimony on Fed renovations [1][2]. Group 1: Federal Reserve Actions - Fed Chair Powell indicated that the Justice Department has issued grand jury subpoenas threatening criminal charges related to his June testimony on Fed headquarters renovations [2]. - Powell emphasized that the threat of criminal charges stems from the Fed's commitment to setting interest rates based on public interest rather than presidential preferences [2]. - The Federal Reserve is expected to cut interest rates by approximately 50 basis points in 2026, contributing to the dollar's underlying weakness [3]. Group 2: Market Reactions - The dollar index (DXY00) is down by 0.32%, reflecting market concerns over the Fed's independence and potential changes in leadership [1]. - The euro (EUR/USD) has risen by 0.35%, supported by the Fed's situation and an increase in the Eurozone's investor confidence index to a six-month high [5]. - Markets are currently pricing in a 5% probability of a 25 basis point rate cut at the upcoming FOMC meeting scheduled for January 27-28 [2]. Group 3: Future Expectations - The Federal Reserve has begun purchasing $40 billion a month in T-bills to boost liquidity in the financial system, which is also putting pressure on the dollar [4]. - Concerns are growing that President Trump may appoint a dovish Fed Chair, which could further negatively impact the dollar [4]. - National Economic Council Director Kevin Hassett is viewed as the most likely candidate for the next Fed Chair, perceived as the most dovish option by the markets [4].

Group 1 - The US dollar is experiencing its worst week since June, with Bloomberg's dollar index indicating a significant yearly drop, the steepest since 2017, raising concerns about potential debasement [1] - Central bank reserves are shifting away from the US dollar, but there is no clear alternative currency, leading to increased interest in gold as an asset [2] - The outflow from the US dollar is relatively small compared to the significant inflow into gold, indicating a shift in investor sentiment towards alternative assets [3] Group 2 - The weakening dollar is seen as a consensus trade heading into 2026, but the outlook is mixed, suggesting that the headline numbers may not fully capture the situation [4] - Historically, at the beginning of the year, there tends to be a consensus towards dollar weakness due to long-term overvaluation metrics, although these metrics may not account for productivity gains [5] - When there is no strong bias, dollar weakness often emerges as the favored trade, contrasting with previous periods of dollar strength [6]

Core Viewpoint - Analysts project that the U.S. dollar will continue to weaken, potentially by 10% by the end of 2026, following a decline initiated by President Trump's tariff plans in April [1][3]. Group 1: Dollar Weakness and Economic Impact - The dollar has weakened by as much as 10% this year against a basket of foreign currencies, currently down 7% year-to-date [1][2]. - A weaker dollar affects travel costs, import prices, and investment returns for U.S. households and investors, reshaping portfolios and global trade dynamics [3]. - The Federal Reserve's ongoing interest rate cuts contribute to the dollar's weakness, making U.S. debt less attractive [7]. Group 2: Global Economic Context - Despite the dollar's decline, global trade and markets still heavily rely on the U.S. dollar, indicating that the narrative of "de-dollarization" is largely overstated [2][9]. - The structural foundation of dollar dominance remains intact, supported by deep and liquid markets and the global reach of U.S. financial institutions [10][11]. - The recent rally in gold prices has led to discussions about de-dollarization, but central banks' gold accumulation has not significantly reduced their dollar holdings [12][13]. Group 3: Investor Sentiment and Hedging - Some investors remain cautious about further dollar weakness, which could erode the value of U.S. dollar assets in their portfolios [14]. - The Fed's rate cuts are making it cheaper for investors to buy instruments that hedge against dollar risks, indicating a potential shift in investment strategies [16]. - Analysts are closely monitoring hedging decisions, with indications that the outlook for hedging flows is leaning bearish on the dollar [17].

Geopolitical Developments - Ukrainian President Zelensky anticipates a meeting with President Trump to discuss a 20-point peace plan, which is reportedly 90% ready but requires input from Russia and Europe for finalization [1] - The US Coast Guard has forced the sanctioned oil tanker Bella 1 to divert from Venezuela, as part of President Trump's blockade on sanctioned oil tankers [2] - The US has launched strikes on ISIS targets in Nigeria, collaborating with the Nigerian government to address rising terrorist threats [3] Currency and Economic Outlook - The dollar is under pressure due to the Federal Reserve's liquidity boost, with a monthly purchase of $40 billion in T-bills, and concerns over a potential dovish Fed Chair appointment by President Trump [4][5] - The dollar index fell approximately 0.6% over the week, despite a stronger-than-expected US GDP report of 4.3% [6] - The euro has gained support from ECB members expressing satisfaction with current interest rates, indicating a stable economic outlook [7] Precious Metals Market - Gold and silver prices reached all-time highs, supported by geopolitical tensions and the US's military actions, alongside a strong US GDP report [12] - Central bank demand for gold remains robust, with China's PBOC increasing its reserves for the thirteenth consecutive month, and global central banks purchasing 220 MT of gold in Q3, a 28% increase from Q2 [14] - Fund demand for precious metals is strong, with silver ETF holdings reaching a 3.5-year high and gold ETF holdings recovering close to a 3.25-year high [15]

Gold was steady in the early Asian session, underpinned by dollar weakness that typically makes the precious metal cheaper for potential buyers holding nondollar currencies. ...

Group 1: Dollar Index and Economic Indicators - The dollar index (DXY00) fell to a 1.75-month low, down by -0.55%, influenced by the FOMC's decision to cut the federal funds target range by -25 basis points and increase liquidity through $40 billion monthly T-bill purchases [1] - US weekly jobless claims rose by +44,000 to a 3-month high of 236,000, indicating labor market weakness, which is dovish for Federal Reserve policy [4] - The US September trade deficit unexpectedly shrank to -$52.8 billion, the smallest in 5.25 years, contrasting with expectations of a widening to -$63.1 billion [4] Group 2: Market Reactions and Future Expectations - The markets are pricing in a 24% chance of another -25 basis point cut in the federal funds target range at the upcoming FOMC meeting on January 27-28 [4] - Concerns about President Trump's potential appointment of a dovish Fed Chair have added bearish sentiment towards the dollar, with Kevin Hassett being viewed as the most dovish candidate [3] Group 3: Euro and Yen Performance - The euro (EUR/USD) rose to a 2.25-month high, up by +0.46%, supported by dollar weakness and positive comments from ECB President Lagarde regarding potential economic growth forecast increases [5] - The yen (USD/JPY) decreased by -0.60%, benefiting from a weaker dollar and improved business confidence in Japan, with Q4 BSI large manufacturing confidence reaching a 1-year high [6]

Core Insights - Global investors are advised to reduce exposure to US equities as emerging market stocks are expected to outperform developed market stocks for the first time in five years due to a weakening US dollar [1][4] - The US dollar has weakened significantly, dropping by 10% at one point this year, following a decade-long bull run that began in 2011 [1] - Cambridge Associates predicts a further decline in the dollar, anticipating a multi-year bear market starting in 2026 due to economic policy uncertainty, overvalued assets, and fiscal pressures [2] Market Performance - The weaker US dollar has positively impacted international stocks, with global non-US equities outperforming US equities by 6.6 percentage points in local currency terms and by 13.9 percentage points in US dollar terms in 2025 [3] - Latin America has shown remarkable performance in emerging markets, achieving a 37% year-to-date return on equities, supported by low valuations and improving macroeconomic conditions [5] Investment Recommendations - Cambridge Associates recommends investors to be overweight in global non-US equities in 2026, expecting the trend of outperformance to continue [4] - The heavy reliance on technology stocks in the US market makes it vulnerable, particularly if the artificial intelligence theme loses momentum, which could lead to a pullback by overseas investors [6] Valuation Metrics - The cyclically adjusted price-to-cash-earnings ratio for the MSCI USA index is 2.19 times higher than that of the MSCI Developed Markets index (ex-US), indicating a 50% premium to its long-term median [7] Economic Policy Context - The Trump administration is preparing to appoint a new Federal Reserve chair, with a focus on lower interest rates and a weaker US dollar to address the trade deficit and stimulate US industry [8]

Group 1 - Copper, gold, and silver prices have increased significantly this year, driven by investor hedging against political instability and dollar weakness, alongside tightening supplies of major metals [1] - Copper prices reached a record high of $11,485 per metric ton, reflecting a 34.1% increase year-to-date [2] - The surge in copper prices is attributed to increased demand from AI data center buildouts and renewable energy projects, which are tightening supplies typically used for electric vehicles and smartphones [3] Group 2 - U.S. silver futures have surged by 101.4%, rising from $29.24/oz to $58.88/oz, while gold prices have increased by 60.7% year-to-date [4] - The demand for gold and silver has risen as investors seek protection against political instability, inflation, and a weak dollar, influenced by tariffs and a recent government shutdown [4] - A refined copper supply deficit of 304,000 tons is projected for 2025, with even larger shortfalls expected in the coming year [5]