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Fed officials are also sounding alarms. St. Louis Fed President Alberto Musalem warned that tariff-driven inflation could threaten economic stability, while Minneapolis Fed President Neel Kashkari emphasized that inflation remains uncomfortably high. Both noted that policy uncertainty—especially on fiscal and trade fronts—complicates the Fed’s ability to plan ahead.
Despite the Fed’s reluctance to ease rates prematurely, the dollar is struggling to find support. Kashkari remarked, “The job market has stayed strong, but the biggest challenge is to finish the job,” referencing the Fed’s 2% inflation target. With Treasury yields softening and risk appetite faltering, investor demand for the dollar has weakened in the short term.
Traders are now watching Thursday’s economic data slate, particularly the final Q4 GDP Annualized figure and Initial Jobless Claims. These releases could shift expectations around rate policy and influence dollar positioning.
While the Fed’s hawkish undertone would typically anchor the dollar, the combination of lower yields and heightened trade risk is tilting sentiment bearish—at least for now.
US Dollar Index (DXY) – Technical Analysis
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