The dollar index (DXY00) on Tuesday rose by +0.30% but remained below Monday's 3.5-week high. The dollar rallied on Tuesday as higher T-note yields strengthened the dollar's interest rate differentials. Also, comments on Tuesday from Richmond Fed President Tom Barkin were supportive of the dollar when he said he expects tax cuts and deregulation to lift growth this year. The dollar still has some safe-haven support due to the escalation of geopolitical risks in Venezuela after the US captured Venezuelan President Maduro, and US President Trump said the US plans to temporarily "run" Venezuela.
Bearish factors for the dollar on Tuesday included (1) stock market strength that curbed liquidity demand for the dollar, (2) the downward revision to the Dec S&P services PMI, and (3) dovish comments from Fed Governor Stephen Miran, who said he expects more than 100 bp of Fed rate cuts this year.
