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]

Core Viewpoint - The US dollar is expected to face volatility as markets prepare for potential corrections in US tech stocks, particularly with significant upcoming events such as Nvidia's earnings report and the release of FOMC minutes [1][4][5]. Group 1: Market Sentiment - Global markets are exhibiting nervousness, particularly in the US, as high-yield credit spreads widen to levels not seen since June, raising concerns about credit rating standards following the First Brands bankruptcy [2]. - The "magnificent seven" tech stocks have seen a modest decline of about 7% from their highs, which is minor compared to a 70% rally since April, indicating a crowded trade that could lead to a more significant sell-off if triggered [3]. Group 2: Upcoming Events - The focus is on Nvidia's third-quarter results and the implications of Softbank's decision to divest its entire Nvidia holdings, which may signal broader trends in the US tech sector [4]. - The release of the October FOMC minutes is anticipated to reveal differing views on future monetary policy, which could positively impact the dollar [5]. Group 3: Currency Implications - De-leveraging is likely to favor the dollar, especially against risk-sensitive currencies like the Australian dollar and Mexican peso, as a pullback in risk assets typically strengthens the dollar [6]. - The Swiss franc is currently viewed as a preferred safe haven, particularly due to the Swiss National Bank's limited options for rate cuts or interventions [7]. Group 4: Technical Analysis - The DXY index has encountered resistance at 99.65/70, with no immediate catalysts suggesting a decline, indicating potential buy stops above the 99.75 area [8]. - The EUR/USD volatility has decreased, yet traded volatility has increased, suggesting that investors are still anticipating movements in the currency pair, with a year-end target of 1.18 contingent on softer US data and a Fed rate cut [9]. Group 5: UK Economic Indicators - Recent CPI data from the UK showed a slight increase in headline inflation to 3.6%, driven by rising food prices, which may influence Bank of England policy, although a rate cut is still favored [11].