USD strength to start 2022

Is USD strength set to repeat itself again as 2022 begins? This week will see a string of US data points: ADP jobs, ISM services, Manufacturing PMI, and Non Farm Payrolls on Friday. At the last Fed meeting the Fed projected 3 rate hikes for next year and that is also confirmed by Fed fund futures, so this will make the Fed the second most hawkish central bank behind the RBNZ. One key focus this week will be whether or not the first data points out of the US confirm or contradict the Fed’s more hawkish bias.

In the same way that the dollar sees a period of weakness into year end – see here. The USD also tends to see a strong start to the year as USD outflows are reversed as the year starts. See below for details.

So, if we see a strong run of US data prints this week that should support the seasonal bias for dollar strength. The USD is one to watch as we start 2022.