Pound (GBP) Plunges amid Growing Covid Fears
The Pound (GBP) fell sharply through yesterday’s session amid reports that the UK government was considering introducing new Covid restrictions to combat the spread of the Omicron variant.
Although the new strain seems to produce milder symptoms, Downing Street is increasingly worried that the sheer number of infections could lead to the NHS being overwhelmed.
Last night the government confirmed its intention to implement Plan B. As a result, the Pound may be subdued today.
Euro (EUR) Gains following ECB Comments
The Euro (EUR) firmed against many of its rivals yesterday after European Central Bank (ECB) official Martins Kazaks said it was unlikely that the bank would increase its stimulus programme in response to the Omicron variant.
The remarks boosted EUR as an expansion of stimulus would likely lead to an even later tightening of monetary policy.
The Euro may face headwinds this morning after Germany’s balance of trade figures missed forecasts. The trade surplus in Europe’s largest economy narrowed by €3bn month-on-month and €7bn year-on-year.
US Dollar (USD) Softens amid Risk-Positive Trade
The US Dollar (USD) faced some selling pressure yesterday as fears over the potential economic impact of the Omicron variant continued to ease.
Pfizer/BioNTech announced that a third shot of their Covid vaccine neutralised the Omicron variant in an initial lab test. The news cheered markets, thereby denting the appeal of the safe-haven US Dollar.
Looking ahead, today’s initial jobless claims report could counter the prevailing risk-on mood as economists expect weekly unemployment benefits claims to remain at pre-pandemic levels.
Canadian Dollar (CAD) Stumbles following BoC Decision
The Canadian Dollar (CAD) initially firmed yesterday but then fell following the Bank of Canada’s (BoC) interest rate decision.
The BoC held its benchmark overnight rate at 0.25%, as expected. However, investors were disappointed that the bank did not update its forward guidance, which said that a rate hike would likely come in the ‘middle quarters’ of 2022.
A speech from BoC Deputy Governor Toni Gravelle this afternoon could trigger some movement in CAD, particularly if he elaborates on the bank’s policy position.
Australian Dollar (AUD) Wavers as Risk Sentiment Mixed
The risk-sensitive Australian Dollar (AUD) struggled for direction overnight as geopolitical tensions between the US and both China and Russia offset the upbeat market mood. New Covid restrictions in European countries also weighed on risk appetite.
New Zealand Dollar (NZD) Ticks Higher despite Market Worries
The New Zealand Dollar (NZD), however, managed to edge up on many of its rivals in overnight trade. NZD investors seemingly shrugged off the negative news and focused on Omicron optimism.