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Dollar Forex Market Starts New Year Strongly

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  • Dollar Strength Pressurizes Other Currencies
  • US PMIs in Focus Later Today
  • Stocks Look to Continue Positive Start

The USD forex market has managed to enter the New Year with a show of strength on the first trading day that has carried into Tuesday. 2022 has started much how 2021 ended for the Dollar which has shown very little weakness in the last several months. Strong gains in US treasury yields supported a Dollar climb that has continued as traders turn attention to US PMI data coming later in the day. On Wall Street, markets closed at new records again yesterday with positive sentiment looking to move forward into the New Year. 

Euro Drops on Dollar Return to Strength

The Euro and Pound both had enjoyed a rare positive run in the last days of 2021. This helped the common currency, in particular, to gain well above the 1.13 mark which it had not seen for quite some time previously. Renewed Dollar strength though has brought other majors down slightly and the Euro is now consolidating around the 1.13 mark early in the European trading session. Sterling also ended a three-day positive run on Monday as it starts the day close to 1.345. 

Both are feeling the pressure not only of continuing Omicron variant cases but also of a suddenly stronger US Dollar. The US 10-Year Treasury yield rose sharply on Monday in a move that typically bolsters the safe-haven Dollar. Having struggled to break out lately, this benchmark yield figure now stands above 1.6%. 

Attention Switches to US PMIs

Those forex trading the Dollar and other major currencies now turn their attention to the first major data release of the New Year. This is the ISM Manufacturing PMI and it could shake up markets for the first time since the turn of the year. These numbers are due early on Tuesday and will provide a good indication of economic health at the present time. 

Analysts widely expect the numbers to reflect a drop. The headline number is predicted to fall to 60.2 though this is still well within expansion territory for the economy. Inflation is also expected to dip while so too is employment. This could provide a read on the NFP jobs numbers to come at the end of the week. 

Strong Start to Year on Wall Street

Forex brokers have been busy to start the week, but stock traders have also been in action. The S&P500 and Dow Jones indices both closed out a positive first day of trading for the year at new records. This caps a solid end to last week and impressive gains across 2021 with the S&P up 27% for the year.

Traders will be hoping for more gains to follow although the futures market is trading quietly ahead of PMIs. These could provide direction for the day alongside the JOLTS report and November Job Openings Survey that will also be published. 

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.

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