The dollar index (DXY00) Tuesday fell by -1.20%. The dollar fell sharply Tuesday after President Trump refrained from imposing new tariffs on Asian and European goods on his first day in office, which eases inflation concerns and may allow the Fed to keep cutting interest rates. Also, Tuesday’s decline in T-note yields weakened the dollar’s interest rate differentials and weighed on the dollar. In addition, Tuesday’s stock rally curbed liquidity demand for the dollar.
The markets are discounting the chances at 1% for a -25 bp rate cut at the January 28-29 FOMC meeting.
