Dollar capitalizes on rising yields, eyes on US PMI data

The greenback outperformed its rivals on Monday, supported by the sharp upsurge witnessed in the US Treasury bond yields. The US Dollar Index erased the losses it suffered in the last week of 2021 and continues to edge higher in the early European session on Tuesday. The benchmark 10-year US T-bond yield, which rose nearly 8% on Monday, is currently posting small daily gains at 1.63%. The ISM Manufacturing PMI for December and November JOLTS Job Openings will be featured in the US economic docket in the second half of the day. Statistics Canada will release the Industrial Product Price Index data for November as well.

The risk-positive market environment at the start of the week provided a boost to US T-bond yields. The S&P 500 and the Dow Jones Industrial Average gained 0.64% and 0.68%, respectively, amid easing concerns over the potential negative impact of the coronavirus Omicroin variant on global economic activity. US stocks futures indexes are up between 0.2% and 0.3% in the early European session, suggesting that the market mood is likely to remain upbeat on Tuesday.

EUR/USD fell sharply in the second half of the day and lost more than 60 pips on Monday before settling below 1.1300. The dollar’s market valuation continues to drive the pair’s action. 

GBP/USD snapped a three-day winning streak on Monday and seems to have gone into a consolidation phase around 1.3470 early Tuesday. British Prime Minister Boris Johnson reiterated that they will not reintroduce explicit lockdowns but warned of rising pressure on the healthcare system.

Gold fell sharply amid surging US Treasury bond yields on Monday but managed to hold above $1,800 so far. Another leg higher in yields could cause XAU/USD to test that level one more time. 

USD/JPY rallied to its highest level in five years as the JPY struggled to find demand as a safe haven. The pair is currently trading a little above 115.70, rising 0.35% on a daily basis.

Bitcoin lost nearly 2% on Monday and continues to edge lower toward $45,000 on Tuesday. Ethereum erased a small portion of its losses after touching a daily low of $3,680 on Monday but ended up closing the day in the negative territory.

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