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The US dollar strengthened against major world currencies on Monday, but not against the pound. On the eve of the New Year holidays, the dollar index rose by 0.13% to 96.17 against the six major currencies amid weak trading activity.
The weak trading of USD on Monday can be explained by the fact that markets are still closed after the Christmas celebrations in New Zealand, Australia, Canada and the UK. Those investors who show some activity on Monday's trading are locking in profits by the end of the year, rather than to actually perform trades.
The euro against the US dollar in the last days of this year is clearly weakening. During December, the EUR/USD pair is trading sideways within the 1.2225 - 1.1360 channel. At the time of writing, the euro is trading at 1.1312.
The movement of the EUR/USD pair is determined by both the frankly weak economy of the EU and the slowdown in global GDP growth. The new Omicron strain is forcing European governments to impose severe restrictions, due to which business and consumer activity in the Eurozone are close to recession. The energy crisis is still the biggest problem of the European Union, because Russia does not increase gas supplies, France has shut down its nuclear complexes, and the Russian Nord Stream 2 gas pipeline aimed at solving the problem of energy shortages is still unable to get approval from Germany. For these reasons, the bearish trend on EUR/USD will continue next year.
Today, the pound against the US dollar rose to $1.3400 (from the previous closing level of $1.3385). According to BDSwiss analyst Marshall Gittler, the prospects that the Bank of England may raise the key rate next year support the pound.
Notably, market participants ignore the official data on the growing number of cases caused by the Omicron strain in the UK, France, Australia, and other countries. Perhaps the consolation is that this variant is not so lethal. If, after two weeks, it is clear that the new strain is not causing a lot of deaths, then any news about the COVID-19 may no longer have any impact on the market.
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