US dollar maintains ground
The US dollar held steady via the dollar index overnight, although the surge in positive sentiment in equity markets saw gains in the Canadian, Australian and New Zealand dollar risk barometers. The dollar index held steady at 96.48 and I continue waiting for a break or either 96.00 or 97.00 to signal the US dollar’s next directional move.
EUR/USD remains steady at 1.1270 today with risks still skewed lower thanks to omicron and energy prices. Failure of 1.1200 signalling a test of 1.1000. Sterling has risen by 0.45% to 1.3250 as the UK PM ruled out pre-Christmas restrictions overnight. USD/JPY has edged higher to 114.10 as US bond yields rose overnight.
The three risk-sentiment amigos, the CAD, AUD, and NZD all staged modest rallies overnight, but still remain near 2021 lows. The omicron flavour of the day will continue to dictate directional moves through the holiday period.
Asian currencies are steady as USD/CNY remains near-unchanged at 6.3725. The firm Chinese yuan and diminishing holiday season liquidity are dampening activity in the regional Asia FX space, and I expect range trading to dominate over the rest of the week.
An interesting story is making the rounds this morning, suggesting that researchers at the Walter Reed Army Institute of Research have made substantive progress in developing a compound that protects against multiple coronaviruses, including Covid-19. US equities have risen in response, while the US dollar continues to hold steady. If the report of a super-vaccine is confirmed, it would be a game-changer in the battle against Covid and would likely send risk appetite soaring, which would hurt the US dollar.
