Euro Rallies as New Omicron Variant Rattles Forex Markets

Pound (GBP) Gains despite Fishing Rights Row 

The Pound (GBP) firmed against most of its rivals through Friday’s session, despite an escalation of Brexit tensions. French fishers blocked ports and barricaded the Channel tunnel over the fishing rights row. 

The upside came as panic over the new Omicron Covid variant shook forex markets, causing many of the Pound’s peers to dip. 

Turning to today, the latest consumer credit figures could cause some movement in Sterling, as a rise in credit could indicate increased consumer confidence and spending. 

Euro (EUR) Climbs as Traders Reprice Rate Hike Bets 

The Euro (EUR) strengthened on Friday as markets reduced central bank rate hike bets in response to the new Omicron variant. 

As the European Central Bank’s (ECB) dovish stance has weighed on the Euro in recent weeks, the prospect that other central banks might slow their tightening cycles helped to level the playing field. 

EUR exchange rates also benefitted from the single currency’s negative correlation to the US Dollar (USD), which was subdued throughout the session, and investors flocking to the safer Euro amid a risk-off mood. 

Looking ahead, economists expect the Eurozone’s economic sentiment indicator to have held near highs this month. Any surprise results could trigger movement in EUR. 

US Dollar (USD) Subdued on Federal Holiday Weekend 

The safe-haven US Dollar was muted through Friday’s session, despite the bearish market mood, as the Thanksgiving holiday weekend meant trading conditions for the ‘Greenback’ were thin. 

Fears that the Omicron variant could disrupt the global recovery, and therefore affect the Federal Reserve’s tightening of monetary policy, weighed on the hawkishly priced US Dollar, causing it to dip against its stronger peers. 

USD may remain muted today as investors assess the threat of the new Covid variant. Some speeches from Fed officials and Treasury Secretary Janet Yellen could provide fresh impetus this afternoon. 

Canadian Dollar (CAD) Dented by Tumbling Oil Prices 

The oil-sensitive Canadian Dollar (CAD) fell sharply on Friday, as Covid fears caused crude prices to slump. 

The latest Canadian current account figures could boost CAD this afternoon as forecasters predict the country’s account surplus will widen. 

Australian Dollar (AUD) Edges Higher after Friday’s Fall 

The Australian Dollar (AUD) was hit hard by the initial market reaction to the Omicron variant on Friday. 

However, the risk-sensitive ‘Aussie’ regained some ground overnight as risk appetite recovered slightly from Friday’s shock. 

New Zealand Dollar (NZD) Firms as Market Mood Improves 

Likewise, the New Zealand Dollar (NZD) weakened through Friday’s European session but edged higher during overnight trade amid a more upbeat market mood. 

Samuel Birnie

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