Dollar Rises Further in Response to Fed Taper Talk

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The US dollar brushed off a jumbled US job picture on Friday as investors ignored omicron and priced in a speedier Fed taper from the FOMC, which is expected to be announced next week. Even as the US yield curve flattens, markets have factored in faster rate hikes, strengthening the US currency.

As omicron’s fears fade, the dollar index has risen because of a reversal out of haven currencies like the Japanese yen and Swiss franc. The USD/JPY and USD/CHF exchange rates have climbed 0.16 percent and 0.28 percent, respectively. If the initial indications from South Africa are right, markets will have experienced the lowest levels in both pairs for quite some time.

The commonwealths and the Euro, which are most closely related with risk sentiment, are finding little relief. Sentiment concerns have been replaced by a speedier Fed taper and faster US interest rate hikes, rather than omicron. EUR/USD and GBP/USD have slipped today, respectively, and remain a sell on any rise of 50 to 100 points.

On strong ANZ jobs statistics, the AUD/USD has increased 0.30 percent but the NZD/USD remains stuck. Both are vulnerable to more sell-offs this week, with the AUD/USD forming a very negative head-and-shoulders technical pattern that is aiming for a multi-week move to approximately 0.6000.

Dollar Rises in Tandem With Treasury Yields As Euro Declines

After comforting news concerning Omicron reinforced bets that the Fed will be able to tighten monetary policy at a faster pace, the dollar is rising, tracking bond yields northwards. Riskier currencies, such as the Australian dollar, are rising, while safe-havens, such as the Japanese yen, are falling.

After a drop in German manufacturing orders in October, the EUR/USD is trading at a low level. Following a 1.3 percent growth in September, factory orders fell by -6.9% in October. Supply chain bottlenecks, rising pricing, and, most recently, rising COVID cases are all wreaking havoc on the industry. This might hinder the Eurozone’s largest economy’s growth, which is still below pre-pandemic levels.