Stocks Imply a Risk-on Tone, and Greenback Stabilizes around 96 Mark

Fundamental analysis of Forex market

Dollar’s shine dulls in forex arena; Are Omicron risks set to rise? Will Omicron underpin infections?

The chaotic 2021 period is soon coming to an end and the lack of market driving news on today’s economic calendar is unlikely to help this year leave with a bang. That said, major US index futures are persisting around their all-time highs suggesting that positive market sentiment may roll over into the new year.

It seems that markets have become robust against fresh threats from the coronavirus, even in the holiday season, as Christmas adds infection spikes and unwanted pressures and the recovery. It will be interesting to see what the new year celebrations bring in terms of pandemic related strain on the economy, supply shortages and expectations of interest rate lift off for 2022 should the new year numbers dwarf what we have seen towards year end.

The reserve currency has lost its strength lately, but the dollar index is showing resilience holding around the 96.00 vicinity. Nevertheless, the dollar appears to be on the back foot across the forex arena. The euro is consolidating around $1.1325, while the pound is faring better rising to $1.3450. The yen has struggled to overpower the greenback even at year end with the pair holding around 114.80 per dollar.

The S&P CoreLogic Case-Shiller selling price of single-family homes in 20 metropolitan areas rose 18.4% year-on-year in October of 2021, easing for a third consecutive month and slightly below forecasts of 18.5%.

The average selling price of single-family houses with guaranteed mortgages increased by 1.1% from a month earlier in October, in the wake of a 0.9% advance in September.

All and all, depending on the new developments over the festivities around year end, the risks remain that restrictions could return, should the numbers continue to skyrocket in the first months of 2022.

Oil capitalizes on easing Omicron worries

WTI oil futures five day rally has hiked the price of oil back to around $76.50 per barrel, around a $10 appreciation. Oil appears to be aided by expectations that the variant will have a limited impact on global demand.

It will be interesting to see OPEC+ action in the meeting on January 4, at which the alliance will decide whether to go ahead with a planned 400,000 barrels-per-day production increase in February.

The wind in gold’s sails may be related to the 10-year Treasury yield being so low as well as the precious metals haven appeal. Gold retains its recent buoyancy above the $1,800/oz mark.

In commodity currencies, the loonie appears to be drifting slightly beneath the $1.2800 per dollar mark, while the aussie has pushed to 0.7260, and the kiwi is hovering around 0.6820.

Upcoming at 15:00 GMT, December consumer confidence and the Richmond manufacturing index are due.