## Fed Less Restrictive, Dollar Under Pressure but Supported by Treasury Yields

The dollar index (DXY00) has gained 0.27% in today's session, with US Treasury yields continuing to support the greenback through their interest rate differential advantage. However, long-term prospects for the US currency remain complex, as market expectations of Federal Reserve rate cuts increasingly weigh on global currency balances.

### Contrasting Signals from Monetary Authorities and Economic Data

Richmond Fed President Tom Barkin confirmed that tax cuts and deregulation could stimulate economic growth throughout the year. However, this outlook was tempered by more dovish comments from Fed Governor Stephen Miran, who described the current monetary policy stance as "clearly restrictive" and indicated the possibility of over 100 basis points of rate reductions in 2026.

Economic data released showed signs of slowdown. The December S&P Services PMI was revised downward to 52.5 from the previous estimate of 52.9. Meanwhile, market participants assigned a 16% probability to a 25 basis point cut at the FOMC meeting on January 27-28.

### Geopolitical Tensions Fuel Demand for Safe-Haven Assets

Rising tensions in Venezuela, with announcements from the Trump administration regarding potential temporary control of the country, have strengthened the appeal of the dollar as a safe-haven currency. This geopolitical factor has provided additional support to the greenback, partially counteracting downward pressures from expectations of more accommodative monetary policy.

### Euro and Yen: Two Weakness Scenarios

The EUR/USD pair lost 0.24% during the day, but remained above the lows touched earlier in the week. The euro is facing combined pressures from the strength of the dollar and weaker-than-expected economic data. The eurozone December composite PMI was revised downward by 0.4 points to 51.5, while German inflation (EU Harmonized) showed a monthly increase of 0.2% and an annual rate of 2.0%, disappointing forecasts. Data suggest an accommodative policy stance by the European Central Bank, with markets assigning only a 1% probability of a 25 basis point rate hike at the February 5 meeting.

USD/JPY showed a modest increase of 0.13%, although yen gains remained limited. The yield on Japanese 10-year government bonds reached a 27-year high of 2.139%, improving yen yield differentials. However, Japan’s fiscal outlook continues to weigh on the currency, as the government announced a record increase in defense spending within a budget of 122.3 trillion yen (780 billion dollars). Markets do not foresee a rate hike by the BOJ at the scheduled meeting on January 23.

### Gold and Silver Rise: Chart Analysis and Outlook

February COMEX gold gained $39.60 (0.89%), while March COMEX silver surged by $3.448 (4.50%), extending the rally to weekly highs. In the past 10 years, gold chart analysis shows that periods of geopolitical uncertainty and accommodative monetary policy have historically correlated with significant rallies. The current environment presents parallels with previous phases of safe-haven demand.

Silver has particularly benefited from the strong rally in copper, which reached new all-time highs. Precious metals continue to receive support from persistent global uncertainties, including US trade tensions and geopolitical crises in Ukraine, the Middle East, and Venezuela.

Expectations of a more dovish Federal Reserve in 2026, combined with liquidity injections into the financial system ($40 billion monthly T-bill purchases initiated mid-December), are supporting demand for gold and silver as value preservation tools. The People's Bank of China increased gold reserves for the thirteenth consecutive month in November, while the World Gold Council reports a 28% quarter-over-quarter increase in global central bank gold purchases in Q3.

Investor interest in precious metals remains strong, with gold ETF holdings reaching a 3.25-year high last week, and silver ETF holdings hitting a 3.5-year high on December 23. These data reflect a growing awareness of the role of precious metals as hedges against global economic and geopolitical uncertainty.

### Future Scenarios: Transition Toward a More Dovish Fed

The prospect that the Trump administration will nominate a Fed Chair with a more dovish stance, with Kevin Hassett as a possible leading candidate, adds further pressure on the dollar. Monetary policy decisions expected for 2026 by the Fed, Bank of Japan, and European Central Bank highlight diverging paths that will continue to influence currency movements and safe-haven demand in the coming months.