Dollar keeps firm footing, key events awaited

The greenback managed to outperform its European rivals on the back of rising US Treasury bond yields on Monday but stayed weak against risk-sensitive currencies. As investors gear up for this week’s high-impact events, the dollar holds its ground. The market sentiment remains relatively upbeat ahead of New Home Sales and CB Consumer Confidence Index data from the US. Brexit talks are set to continue in London and the European Central Bank (ECB) will release the findings of its Bank Lending Survey.

Risk mood: The S&P 500 hit a new record high of 4,572 on Monday and risk flows continue to dominate financial markets early Tuesday with US stock index futures rising between 0.2% and 0.5%. US President Joe Biden signed an order to lift travel restrictions on China, India and many European countries on Monday. Moreover, Democrats are reportedly closing in on a deal on the spending bill, that will be worth between $1.5 and $2 trillion.

On a concerning note, coronavirus cases are on the rise again. China warned that the latest COVID-19 outbreak is likely to spread further and Russia reported a record-high number of 37,930 cases on Monday.

After failing to break above 1.7% last week, the benchmark 10-year US Treasury bond yield gained more than 1% during the day on Monday before closing flat around 1.65%, where it continues to move sideways on Tuesday.

EUR/USD lost nearly 40 pips on Monday as the latest data from Germany showed a deterioration in sentiment and Bundesbank revised its 2021 growth forecast lower. Currently, the pair is testing 1.1600.

GBP/USD is struggling to gain traction since David Frost, the British minister responsible for implementing the Brexit deal, said that the EU’s proposal on the Northern Ireland protocol was not going “far enough” to free up trade in the region.

Despite the renewed USD strength, gold climbed above $1,800 on Monday and seems to have gone into a consolidation phase. The sharp upsurge witnessed in XAU/USD and XAU/GBP pairs suggests that investors moving away from European currencies are ramping up the demand for the precious metal.

USD/JPY is clinging to modest gains around 114.00 as the safe-haven JPY fails to attract investors in the current market atmosphere.

Cryptocurrencies: After staging a correction toward $60,000, Bitcoin started to edge higher on reports claiming that Mastercard is looking to offer crypto services to banks and merchants in its network. Ethereum continues to edge higher toward $4,400, where the all-time high is located.

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