While stock markets continue to grind higher ahead of the Christmas holidays, the dollar looks mixed in thin trading conditions. The greenback continues to ignore the incoming economic data out of the United States, lacking safe-haven demand as Omicron-related optimism persists for the third day in a row.

Of note, US stocks are approaching the area of all-time highs, recovering after a major sell-off witnessed at the start of the week. Fresh data showed today that the US durable goods orders rose by 2.5% month-over-month in November compared to market expectations for a 1.6% rise.

The US Department of Labor said there were 205,000 initial claims for unemployment benefits last week, in line with the market consensus. Meanwhile, US personal income rose by 0.4% on a monthly basis, marking a slight moderation in growth rates since October's 0.5% figure. US November PCE core, the Fed's preferred measure of inflation, arrived at +4.7% versus +4.5% expected. Despite the macro data coming in mostly strong and confirming the rising inflation, the dollar didn’t react to the reports.

The USD index stayed 0.1% higher on the day, continuing to tread water above the 96.00 figure. In part, this is due to the fact that risk trends are the key driving force at the moment. Also, many traders are already leaving the market ahead of holidays. 

Still, as the PCE inflation figures exceeded the market consensus, expectations of a more aggressive tightening by the Fed in 2022 could rise further and push the greenback higher eventually. In this context, the Q1 outlook for the USD index looks upbeat, with long-term highs around the 97.00 figure remaining in the market focus.