The U.S. dollar index (DXY) weakened since the New York session yesterday to reach the level of 95.40s again at the beginning of the European session on Thursday (January 20). 

The America’s Treasury bond yields stepped back from record highs, while bond yields of several other countries actually climbed. That could be seen from the data. 

Meanwhile, the rising commodity prices strengthened the Canadian dollar and the Australian dollar. The yield on the 10Y U.S. Treasury note is currently at 1.845%.

That was a short jump behind a two-year high of 1.902% reached yesterday. This correction is related to mere market mechanisms and not due to changes in expectations of a "Fed rate hike".

A Prediction Made by the Analysts about the Rate Hike

Markets still expect four Fed rate hikes in 2022. The Reuters survey showed the median forecast of a "Fed rate hike" among 86 analysts was three times.

That is starting from March and twice more until reaching the range of 0.75-1.00% by the end of 2022. However, half of respondents said that they expected four rate hikes.

The Bond yields in other developed countries also rose along with the tightening monetary policy outlook. These are included in Canada, Australia, New Zealand, the United Kingdom, and the Eurozone. 

The Bund 10Y yield even reached the levels above 0% for the first time since 2019, thus strengthening the foundation of the euro exchange rate so far. 

AUD and Loonie are Supported by the Commodity Price

The Aussie dollar and loonie were also supported by rising commodity prices, in addition to Australian labor data and strong Canadian inflation data. 

The price of Brent crude oil on Wednesday hit $89.17 per barrel as the highest one since October 2014. Newcastle's coal and iron ore futures contracts are at their highest range since October 2021.

Overnight commodity prices are a big driver for commodity currencies. However, you still get the impression that Omicron won't have a lasting adverse impact on the global economic outlook.

That opinion was said by Kim Mundy, a senior economist and currency strategist at Commonwealth Bank of Australia based on the recent situation in the market. 

The Australian Employment Change is Beyond the Expectation 

Elsewhere, On Thursday, the Australian Bureau of Statistics released anEmployment Change data that added 64.8k in December. This figure is indeed down from the surge in November.

However, that was better when compared to the expectations of an increase that is only pegged at 43.3k. In further detail, the Australian employment last month was supported by a 41.5k rise in full-time employment. 

Meanwhile, the part-time job category increased by 23.3k. Although December's job growth was unable to repeat the impressive gains from the previous month, the Australian labour market remains on a positive path.

The Job Fields are still not Evenly

Unfortunately, the job gains don't occur evenly across the state. New South Wales saw an increase of 0.8, followed by Victoria which increased 0.7 per cent and Queensland by 0.2 per cent.

The Northern Australia actually posted a 1.3% rise in employment. But because the labor population is small, the increase in employment in this region does not contribute much in general.

The Australia's jobless rate fell from 4.6% to 4.2% in December. This positive achievement has the potential to encourage increases in workers' wages and the inflation rate.

That has been the RBA's benchmark in determining the benchmark interest rate. Pretty satisfactory employment data this morning successfully pushed the Australian Dollar up against the Greenback. 

The AUD/USD pair is in the range of 0.7243 or strengthening by 0.45 percent on a daily basis. This is in line with the rising view of market participants that an increasingly solid labor market will trigger a more hawker view from the RBA.