Dollar starts new year on a firm footing

Profit-taking into the New Year holiday caused the greenback to close the last two weeks of 2021 in the negative territory. With trading conditions normalizing on the first day of 2022, the dollar started to gather strength against its rivals with the US Dollar Index rising 0.25% in the early European session. IHS Markit will release the final revision to the December PMI reading for Germany, the euro area and the US. December Construction Spending data will also be featured in the US economic docket.

The market mood remains relatively upbeat on Monday despite reports revealing that shares in China’s Evergrande group had been suspended from trading in Hong Kong. US stock index futures are up between 0.35% and 0.55% while the benchmark 10-year US Treasury bond yield is moving sideways around 1.5%.

In the meantime, crude oil prices are rising after Libya’s state-owned National Oil Corp. said over the weekend that its oil output is expected to drop by another 200,000 barrels a day (bpd) over the next week due to maintenance. The barrel of West Texas Intermediate (WTI) was last seen rising 0.7% on the day at $75.90.

EUR/USD capitalized on the broad dollar weakness and reached its strongest level in nearly six weeks at 1.3478 late Friday. The pair is staging a technical correction early Monday and was last seen losing 0.25% at 1.1340.

GBP/USD gained more than 100 pips last week but started the new week on the back foot. The number of confirmed coronavirus cases in the UK continue to rise at a rapid pace and British Prime Minister Boris Johnson is expected to issue an update on Omicron-related restrictions later in the day. Meanwhile, the pair is trading in the negative territory around 1.3500.

Gold extended its year-end rally and rose above $1,830 for the first time since late November. XAU/USD seems to have gone into a consolidation phase early Monday but stays afloat above $1,820 so far.

Despite the dollar weakness, USD/JPY managed to preserve its bullish momentum during the last week of 2021, supported by rising US Treasury bond yields. With the JPY having a tough time finding demand as a safe haven, the pair closes in on the multi-year high it set at 115.53 in late November.

Bitcoin spent the weekend in a relatively tight range below $50,000 and continues to move sideways near $47,000 early Monday. Ethereum managed to register modest gains in the previous two days but stays below key $4,000 handle.

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