The US dollar rose for a fourth consecutive session on Monday, climbing to its highest level in around two weeks as geopolitical risks drove demand for the currency.
Treasury yields could decline if demand for safe-haven assets remains elevated. However, the impact could be limited if tensions abate.
At the same time, markets could remain cautious ahead of a critical week for monetary policy expectations as new data releases could shape the outlook for both the dollar and interest rates. Attention turns to remarks from Federal Reserve members this week. Any guidance on the balance between inflation and labour could inject volatility into forex and bond markets.
On the data side, the ISM Manufacturing PMI for December is expected to edge higher to 48.3, but remain in contraction territory, reinforcing concerns about industrial momentum. On Wednesday, the ISM Services PMI is forecast to ease modestly, while the JOLTS report is expected to show job openings ticking up to 7.73 million from 7.67 million previously. The week culminates with Friday’s nonfarm payrolls report, where job growth is projected to slow to around 57,000 from 64,000.
Any signs of a weakening labour market or fading economic momentum would likely revive expectations of a more dovish Federal Reserve in 2026, weighing on both the dollar and yields. Conversely, resilience in employment or services activity could reinforce the dollar’s recent rebound.
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