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US bond yields are experiencing high volatility. After a long weekend both the 2-year and 10-year US Treasury yields jumped to fresh two-year highs, as investors are pricing a faster pace of tightening from the US Federal Reserve. If the Fed decides to raise interest rates while other central banks like ECB prefers to keep them unchanged, this could likely favor USD.  The US central bank's first meeting of the year will take place on 27th January. Market participants will be closely looking for confirmation that the first rate hike will take place in March. The EURUSD pair is trading at 1.1346 at the time of writing. Will it resume its upward trend or is it a false breakout?

The ruble is getting hit hard as negotiations between US and Russia seem to go nowhere. The Ruble is losing steam despite rising oil prices. Markets are pricing rising odds of near term economic sanctions that will further weaken the Russian economy. Recent sanction fears seem to have interrupted the great rally ruble enjoyed last year. Data from options traders indicate high level of bearishness.

💡 Value stocks have come back significantly in 2021, while growth stocks  faced headwinds with a more difficult year-on-year growth comparisons and as central banks began withdrawing stimulus. Investors have rotated growth names for a larger allocation weigh to value stocks. On top of that earnings for value stocks have been very strong, and supported by buybacks thanks to healthy balance sheets.   

💡 Bets on the USD strengthening reach highest since June 2019. Investors are positioning heavily into the USD, on expectations that the Fed will withdraw stimulus next year and begin a number of rate hikes. The path to rate hikes will be dependent on the state of the US economy and inflation. Investors could also be finding comfort in holding USD as an alternative to other assets more vulnerable to a pullback. The Dollar is also finding buyers amid very high inflation rates in some regions such as Turkey, most recently.   

Sentiment improved on Wednesday afternoon with Omicron fears easing. New study shows Omicron could have 80% lower risk of hospitalization. EUR/USD shot up +0.5% to 1.1338. In a risk-on fashion investors sold USD long positions. The broader stock markets are ripping higher, consolidating on yesterday's gains. The outlook remains mixed as investors digest central banks tightening, and Omicron fears. We are closer to entering a period of the year usually favorable for stocks, between Christmas and the first few weeks following New Year.