Currency Market Overview - The dollar index (DXY00) has dropped to a 2-week low, down by -0.84%, primarily due to President Trump's actions regarding Greenland, which have raised fears of trade confrontations with European allies [1] - The Federal Open Market Committee (FOMC) is expected to cut interest rates by approximately -50 basis points in 2026, contributing to the dollar's underlying weakness [3] - The Federal Reserve has begun purchasing $40 billion a month in T-bills, which is increasing liquidity in the financial system and putting additional pressure on the dollar [4] Euro and Yen Performance - The EUR/USD pair has rallied to a 3-week high, up by +0.66%, driven by dollar weakness and positive economic expectations from Germany, where the ZEW survey expectations for economic growth rose to a 4.5-year high of 59.6, exceeding expectations of 50.0 [5] - The USD/JPY pair is down by -0.03%, with the yen gaining strength due to safe-haven demand amid rising trade tensions between the US and Europe, as well as higher Japanese government bond yields, which have reached a nearly 27-year high of 2.359% [7] Economic Indicators - The German Producer Price Index (PPI) for December fell by -2.5% year-on-year, which was weaker than the expected decline of -2.4% and marks the steepest pace of decline in 20 months [6] - Swaps are indicating a 0% chance of a +25 basis point rate hike by the European Central Bank (ECB) at the upcoming policy meeting on February 5 [6]

Economic Indicators - The dollar index (DXY00) increased by +0.17%, reaching a 4-week high, driven by positive US economic news [1] - US job cuts in December fell by -8.3% year-over-year to 35,553, marking a 17-month low, indicating a supportive factor for the labor market [2] - Weekly initial unemployment claims rose by +8,000 to 208,000, which was better than the expected 212,000, suggesting a stronger labor market [3] - Q3 non-farm productivity rose by +4.9%, close to the expected +5.0%, representing the largest increase in 2 years [3] - Q3 unit labor costs fell by -1.9%, a larger decline than the expected -0.1% [3] - The US trade deficit unexpectedly shrank to -$29.4 billion, significantly better than the expected widening to -$58.7 billion, marking the smallest deficit in 16 years [3] Market Expectations - Markets are currently pricing in a 12% chance of a -25 basis point rate cut at the FOMC's next meeting on January 27-28 [4] - The Federal Reserve is expected to cut interest rates by about -50 basis points in 2026, while the Bank of Japan is anticipated to raise rates by +25 basis points in the same year [4] Dollar Dynamics - The dollar is under pressure due to the Fed's liquidity boost, having started to purchase $40 billion a month in T-bills since mid-December [5] - Concerns regarding President Trump's potential appointment of a dovish Fed Chair are also bearish for the dollar, with Kevin Hassett being the most likely candidate [5] Eurozone Impact - The EUR/USD pair fell to a 4-week low, down by -0.03%, influenced by the strength of the dollar and unexpected declines in Eurozone economic confidence [6] - Easing producer price pressures in the Eurozone, following the steepest decline in 13 months, are seen as dovish for ECB policy, further weighing on the euro [6]

The dollar index (DXY00) rallied to a 1-week high on Wednesday and finished up by +0.07%.  The dollar moved higher on Wednesday as T-note yields rose after weekly US unemployment claims unexpectedly fell to a 1-month low, a hawkish factor for Fed policy. Also, the weakness in stocks on Wednesday boosted some liquidity demand for the dollar. Questions about the Fed's independence are limiting gains in the dollar after President Trump said Monday evening that he "still might" fire Fed Chair Powell.  Also, ...

The dollar index (DXY00) is down -0.30%, falling back from last Friday's 1-week high.  The dollar continues to see underlying weakness as the FOMC is expected to cut interest rates by about -50 bp in 2026, while the BOJ is expected to raise rates by another +25 bp in 2026, and the ECB is expected to leave rates unchanged in 2026. The dollar is also under pressure as the Fed boosts liquidity in the financial system, having begun purchasing $40 billion a month in T-bills in mid-December.  The dollar is als ...

The dollar index (DXY00) climbed to a 1-week high on Friday and finished up by +0.19%.  The dollar rose on Friday amid yen weakness.  Also, upbeat comments on Friday from New York Fed President John Williams supported the dollar, as he said some of the data we're seeing is "pretty encouraging" and that he sees no sign of a sharp deterioration in the jobs data.  The dollar fell back from its best level after the University of Michigan's US Dec consumer sentiment index was unexpectedly revised lower.  Also, ...

The dollar index (DXY00) today is up by +0.09%.  The dollar recovered from early losses today and turned higher as Eurozone fiscal concerns weighed on EUR/USD.  The dollar also found some support today after US weekly jobless claims fell as expected.  The dollar initially moved lower today due to the weaker-than-expected US reports on the Nov CPI, and the Dec Philadelphia Fed business outlook survey, which may prompt the Fed to keep easing monetary policy.  Also, strength in stocks today has curbed liquidi ...

The dollar index (DXY00) on Tuesday fell to a 2.25-month low and finished down -0.21%.  The dollar was under pressure from Tuesday's Fed-friendly US economic reports on Nov payrolls, Oct retail sales, and Dec S&P manufacturing activity that bolster the outlook for the Fed to keep easing monetary policy. The dollar is also under pressure as the Fed boosts liquidity in the financial system, having begun purchasing $40 billion a month in T-bills, effective last Friday.  Finally, the dollar is also being und ...

The dollar index (DXY00) today is down by -0.28% and slid to a 2.25-month low.  The dollar is under pressure from today's Fed-friendly US economic reports on Nov payrolls, Oct retail sales, and Dec S&P manufacturing activity that bolster the outlook for the Fed to keep easing monetary policy. The dollar is also under pressure as the Fed boosts liquidity in the financial system and began purchasing $40 billion a month in T-bills effective last Friday.  Finally, the dollar is also being undercut by concern ...

Group 1: Dollar Index and Federal Reserve - The dollar index rose by +0.09% on Monday, recovering from early losses due to a jump in T-note yields, which strengthened the dollar's interest rate differentials [1] - The near-term upside for the dollar is limited as the market expects the Fed to cut the federal funds target range by 25 basis points at the upcoming FOMC meeting [1][3] - A 99% chance is being discounted by the markets for a 25 basis point cut in the federal funds target range at the conclusion of the FOMC meeting [3] Group 2: Eurozone Economic Indicators - Losses in the euro were limited due to better-than-expected Eurozone economic news, including a rise in the Eurozone Dec Sentix investor confidence index by +1.2 to -6.2, surpassing expectations of -6.3 [4][5] - German Oct industrial production increased by +1.8% month-over-month, significantly above expectations of +0.3% month-over-month, marking the largest increase in seven months [5] Group 3: Central Bank Policies - Divergent central bank policies are supportive of the euro, as the ECB has concluded its rate-cutting cycle while the Fed is expected to continue cutting interest rates [5] - Hawkish comments from ECB Executive Board member Isabel Schnabel indicated comfort with market expectations for the ECB's next interest rate move being an increase [4]

The dollar index (DXY00) today is up by +0.11%.  The dollar shook off early losses today and moved higher to a jump in T-note yields, which strengthened the dollar’s interest rate differentials.  The dollar’s near-term upside is limited amid expectations that the Fed will cut the federal funds target range by 25 bp at the conclusion of the Tue/Wed FOMC meeting. Also, strength in EUR/USD today is weighing on the dollar due to hawkish ECB comments. President Trump said last that he will announce his selecti ...