The dollar index (DXY) increased by 0.05% today, driven by hawkish comments from Federal Reserve officials. Chicago Fed President Austan Goolsbee expressed concern over maintaining a rate cut amidst high inflation, while Kansas City Fed President Jeff Schmid advocated for a “modestly restrictive” policy. Stocks showed weakness today, further boosting demand for the dollar.
In related news, the markets are pricing a 24% chance of a 25 bp rate cut at the FOMC meeting on January 27-28, with the dollar’s gains limited by the Fed’s plans to purchase $40 billion in T-bills each month, commencing today. Additionally, the euro is down 0.03% as market expectations diverge regarding central bank policies, with the ECB likely pausing rate cuts.
Japan’s October industrial production was revised upward to a 1.5% m/m increase. The yen is under pressure from a stronger dollar but could gain traction if the BOJ raises interest rates by 25 bp at the upcoming December 19 meeting, with a 91% probability currently priced in.
