US Dollar Mixed Early-Monday, Inflation Data, Omicron Key this Week

Dec 06, 2021 (Source) MT Newswires

The US dollar was mixed against its major trading partners early-Monday, as markets continue to eye the metrics on the omicron variant in the absence of any key data earlier in the week until the November CPI release on Friday.

There are no Federal Reserve speakers this week due to the quiet period before the Dec. 14-15 Federal Open Market Committee meeting, so the data schedule and news on the virus will shape expectations for a faster pace of tapering.

Analysts have suggested that the mixed employment report released on Friday was not enough to dissuade the FOMC from accelerating the reduction in asset purchases.

A strong consumer inflation reading on Dec. 10 would increase the chances of a faster taper, with only an extremely pessimistic outlook for the omicron wave enough to make the Committee think twice.

The following is a quick summary of foreign exchange action heading into Monday:

USD-JPY rose to 113.2205 from 112.8234 at Friday's US close, as the lack of any major news on the omicron variant over weekend settled markets, a negative for the yen's safe-haven status. The pair is still down slightly from 113.3354 at the same point on Friday before the US employment report, and off substantially from the 115.3431 level before the omicron variant was reported.

USD-CAD slipped to 1.2785 from 1.2844 at the Friday US close and 1.2827 at the same point Friday morning but is up from 1.2737 at the same point a week ago. The much stronger-than-expected Canadian employment report compared favorably with the mixed US version, lifting the Canadian dollar. The Bank of Canada holds its policy meeting on Dec. 8, one week before the Fed.

EUR-USD slipped to 1.1296 from 1.1309 at the Friday US close and 1.1312 at the same point Friday morning. The pair was at 1.1291 a week ago. Rising COVID cases remains the key story in Europe, with most new infections still of the delta variant but also with indications that the omicron strain is finding a footing. Germany announced a nationwide lockdown of the unvaccinated last week and other countries have instituted travel bans to prevent further spread of the omicron variant. German factory orders turned sharply lower in October according to data released earlier on Monday ahead of Tuesday's industrial production report.

GBP-USD rose slightly to 1.3274 from 1.3235 at the Friday US close and from 1.3265 Friday morning before the US employment report but was down from 1.3345 a week ago. Data released earlier on Monday showed that the UK construction PMI jumped to 55.5 in November, indicating acceleration in the sector, but COVID cases remain front and center in the market's focus. The Bank of England meets on Dec. 16, one day after the Fed's announcement, but a rate increase, once believed to have been securely locked in for the December meeting, now appears more likely in early-2022 due to the uncertainty.

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