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Forex Today: Markets eye yields in the absence of high-tier data releases

Here is what you need to know on Monday, January 10:

The benchmark 10-year US Treasury bond yield climbed to its highest level in nearly two years on Friday and helped the greenback stay resilient against its rivals despite the disappointing December Nonfarm Payrolls (NFP) reading. The US Dollar Index, which dropped to 95.70 area, is currently in the positive territory near 96.00.  There won't be any high-impact data releases from the US on Monday. The European economic docket will feature January Sentix Investor Confidence and November Unemployment data. Market participants will remain focused on bond yields' impact on risk sentiment and currency valuations. 

The US Bureau of Labor Statistics announced on Friday that NFP rose by only 199,000 in December, missing the market expectation of 400,000. However, wage inflation, as measured by the Average Hourly Earnings, arrived at 0.6% and 4.7% on a monthly and yearly basis, respectively. With these figures surpassing analysts' forecasts, markets started to price in a faster policy tightening by the Federal Reserve. The probability of a 25 basis points rate in March stands at 73.4% early Monday, compared to 57.1% same time last week, according to the CME Group's FedWatch tool.

In the meantime, investors remain concerned about the ongoing issues in the Chinese property sector with Evergrande closing in on the deadline for bondholders to vote on the plan to delay an option for early repayment of its yuan-denominated bonds.

US stock markets futures trade little changed on Monday. The S&P 500 Index lost nearly 2% in the first week of 2022 but the financial-heavy Dow Jones Industrial Average closed virtually unchanged.

EUR/USD advanced toward the upper limit of its five-week-old trading range above 1.1350 with the initial market reaction to the US December jobs report on Friday but reversed its direction early Monday. Currently, the pair is trading around 1.1330. It's worth noting that the 10-year German government bond yield is looking to cross into the positive territory for the first time since May 2019 and the shared currency could find demand in case that happens.

GBP/USD closed the third straight week in the positive territory but seems to be having a difficult time climbing above 1.3600 for the time being. 

USD/JPY lost its bullish momentum in the second half of the previous week despite rising US Treasury bond yields as the risk-averse market environment helped the JPY gather strength as a safe haven. The pair was last seen posting modest daily gains around 115.80.

Gold struggled to capitalize on the selling pressure surrounding the dollar on Friday and closed the week below key technical resistance levels that are located around $1,800. XAU/USD seems to have gone into a consolidation phase around $1,790.

Bitcoin fluctuated in a very tight channel over the weekend but ended up losing more than 10% on a weekly basis. BTC is currently trading sideways near $42,000. Ethereum suffered its largest one-week loss since May as it erased nearly 18% but managed to stay afloat above $3,000 for the time being.

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

More from Eren Sengezer
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