The Omicron Covid variant has now been discovered globally with cases in the USA, UK and EU. Despite early warnings, the invertible spread may lead to loosening of travel restrictions as containment looks unlikely – positive news for Oil after a week in decline. Initial fears about the variant have been downplayed with news the variant may be “milder” despite being contagious.
The dollar particularly benefited from safe-haven inflows last week and despite some mid-week weakness against other majors, the dollar ended higher this week with The Federal Reserve’s (FED) hawkish announcements of asset tapering and inflation. Here’s a look at the week ahead.
USD TRADING
Chair Jerome Powell of the FED signalled they are ready to accelerate the tapering process of assets and prepare to raise interest rates to curb inflation fears. The dollar has been in an upward trend and its strength may continue this week unless covid fear’s slow the FED’s actions and push investor appetite towards Yen and Gold.
GBP TRADING
The United Kingdom took a light approach to Covid restrictions which helped maintain its steady recovery beating pre-covid consumer spending numbers. A relaxed restrictions approach may help outpace the EUR whilst EU implements tougher restrictions. Any strength against the dollar would require an early interest rate hike from the Bank of England which look unlikely with the uncertainly of the new Covid variant. Brexit, government scandals and any further restrictions could impact sterling this week.
EUR TRADING
Fears of Brexit, uncontained Covid cases and the potential for civil unrest due to the lockdown of the unvaccinated population in Germany and Austria are all cause for concern. Investors will be keeping a close eye on Tuesday 7th GDP figures from Eurostat. The consensus predicts a non-event but a change either up or down would confirm the EUR’s short term movement this week.