The dollar index rose by +0.23% due to weakness in the yen, hitting a 1.5-year low. US Oct new home sales fell less than expected, boosting the dollar. St. Louis Fed President Musalem expects strong US economic growth. Dec CPI met expectations, while core CPI was below expectations.

The dollar’s gains were limited by lower than expected US core consumer prices in December. Concerns over Fed independence remain after Powell’s comments on DOJ pressure. The markets are pricing in a 3% chance of a -25 bp rate cut at the next FOMC meeting.

EUR/USD fell due to dollar strength, but threats to Fed independence limited gains. Swaps see a 1% chance of a +25 bp ECB rate hike. USD/JPY rose as the yen hit a 1.5-year low against the dollar. Concerns over Japan’s fiscal policy and China-Japan tensions are affecting markets.

Gold and silver prices rose, with gold hitting new highs. Precious metals demand increased due to concerns over Fed independence and dovish Fed comments. President Trump’s actions to lower borrowing costs boosted demand for precious metals. Safe-haven demand also supports precious metals amid geopolitical risks.

Central bank demand for gold is strong, with China and global banks increasing reserves. Fund demand for precious metals is high, with long ETF holdings at multi-year highs. Concerns over Fed policy, liquidity injections, and geopolitical risks continue to support precious metals prices.

Read more at Yahoo Finance: Dollar Gains on Yen Weakness and Hawkish Fed Comments