Improved Mood Pushes The Dollar Higher

Fears retreated on Monday after panic had dominated financial markets for three days when stocks markets collapsed following the news on a new virus variant known as Omicron. However, the market’s reaction may have been worsened by thin market conditions due to the Thanksgiving holiday in the US.

Up till Monday, the market knows little about the new strain. However, Pfizer announced its testing its vaccine on a new variant, while Moderna announced it would have a new shot ready for early on 2022 if needed. US President Joe Biden made a press conference to update the country on the matter.

Shares fell in Asia, but European and American indexes posted gains, reflecting the better mood. US bond yields ticked higher, with the 10-year Treasury note yielding 1.53% ahead of Wall Street’s close.

European Central Bank governing council member Pablo Hernandez de Cos said Monday that European policymakers aim to avoid the premature tightening of the monetary policy, repeating that high inflation could be expected to be transitory, despite being stronger and more persistent than anticipated a few months ago. German inflation printed at 6% YoY in November, according to preliminary estimates.

The dollar trades mostly higher against its major rivals, although volatility was limited. The EUR/USD pair trades around 1.1260, while GBP/USD is below the 1.3300 threshold. USD/CAD is at 1.2760, while the AUD/USD pair is close to the year low at 0.7105. Safe-haven currencies bounced modestly, with the USD/JPY pair now at 113.80.

Gold edged humbly lower after flirting with the 1,800 level, now trading at around $1,782 per ounce. Crude oil prices also ticked lower, with the barrel of WTI currently at $70.40.

More broadly, the fact that the US dollar has been picking up amid a rise in long-term US government bond yields (long-term UK yields have seen a much more modest rise on Monday) is weighing on the pair.