New year, same factors moving the greenback – the impact of Omicron and Fed speculation. The highly contagious COVID-19 variant may lead to new restrictions while the Fed's minutes and the NFP could also boost the dollar, FXStreet’s Analyst Yohay Elam reports.

All other factors are only a distraction

“The most important market-mover is Omicron. Markets currently see the glass half-full, hoping that this wave would subside as quickly as it rises. Optimism is good for stocks and weighs on the safe-haven dollar. On the other hand, the sheer number of cases means hospitals could still come under pressure and that could trigger governments to impose restrictions. Now that the holidays are over, it would be politically easier to impose new curbs. When worries take over, stocks fall and the dollar rises.” 

“Will the Fed raise rates as soon as March, wait until May as markets price, or up to June? Hints could come with the Fed's meeting minutes published on Wednesday and also Nonfarm Payrolls on Friday. A strong jobs report – especially one accompanied by a robust increase in wages – could send the dollar higher on expectations for an early move from the Fed. Disappointing data would do the opposite.”

“Other factors are minor – these include worries about China's Evergrande, tensions between Russia and Ukraine, and commentary by market analysts about the prospects of the global economy. These factors come into play only in the absence of virus or inflation fears.”