High-beta currencies rise as Omicron anxiety subsides, NOK gains
10:06, 8 December 2021
Risk-sensitive currencies gained traction as fears about the Omicron variant eased, while the euro gained on the election of Germany’s new chancellor.
Early research on vaccine efficiency against the new Covid-19 strain indicates that a booster dose of the Pfizer-Biontech vaccine can improve protection against infection and serious illness.
The US dollar marginally fell against the euro and the British pound (GBP) but held steady against other low-yielding currencies including the Swiss franc (CHF) and the Japanese yen (JPY).
- EUR/USD was up by 0.09% to 1.1277 by 10:15 GMT
- USD/JPY was flat at 113.56 (-0.01%)
- USD/CHF edged slightly down to 0.9243 (-0.09%)
- GBP/USD ticked up to 1.3231 (+0.09%)
The Australian dollar (AUD) was the outperformer yesterday amid the improved optimism about the Omicron variant and China’s policy easing.
The Reserve Bank of Australia (RBA) left the interest rate unchanged at 0.1% but said the Omicron variant was unlikely to derail the country’s economic recovery. The New Zealand dollar (NZD) was marginally lower in European morning trading.
The oil-linked Norwegian krone (NOK) led gains across the G-10 currency space, supported by rising oil prices – with Brent crude hovering around $75 a barrel. The Canadian dollar (CAD) was slightly lower as traders awaited today’s Bank of Canada (BoC) interest rate decision. Consensus expects the BoC to stay on hold.
In emerging markets, geopolitical risks over Ukraine intensified between the US and Russia, although the Russian ruble (RUB) was not particularly affected in this phase.
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Forex daily matrix – 8 December 2021
The US dollar index (DXY) was last seen at 96.20 levels, roughly unchanged on the day.
Despite the positive mood across risky assets, the US dollar held its ground against low-yielding currencies, as the argument of monetary policy divergence resurfaced.
Yields on the treasuries market were little moved, with the 2-year note at 0.66% and the 10-year at 1.45%.
Meanwhile, investors brought forward rate hike expectations for next year. US money markets now predict a Fed rate hike in May 2022 with a 60% probability, according to CME’s latest FedWatch Tool.
On the data front, the US trade deficit decreased significantly to $67.1bn in October 2021, the lowest level in six months, down from a record high of $81.4bn in September and in line with market expectations of $66.8bn, as exports increased 8.1%to a record $223.6bn.
The market’s focus will now move to Friday’s November Consumer Price Index and next week’s Federal Reserve meeting (16 December).
US dollar (DXY) technical levels:
- 52-week high: 96.82
- 52-week low: 89.22
- 50-day moving average (1-day chart): 94.78
- 200-day moving average (1-day chart): 92.60
- 14-day Relative Strength Index (RSI) (1-day chart): 61.75
Chart of the day: A rate hike in May 2022 is once again more likely than not
EUR/USD was last at 1.1277, up 0.1% on the day.
Yesterday, the euro was supported by stronger than expected industrial production in Germany, up 2.8% month on month in October, well above forecasts of a 0.8% rise, and by positive employment and activity data for the euro area.
In an added boost, the German Bundestag elected Olaf Scholz as the country’s new chancellor, succeeding Angela Merkel after 16 years. Mr Scholz’s new coalition includes the Social Democrat Party (SPD), Greens, and Free Democrats (FDP).
EUR/USD technical levels:
- 52-week high: 1.2349
- 52-week low: 1.1184
- 50-day moving average (1-day chart): 1.1483
- 200-day moving average (1-day chart): 1.1808
- 14-day Relative Strength Index (RSI) (1-day chart): 40.60
The GBP/USD pair traded at 1.3231 by 10:15 GMT, up 0.1% on the day.
Sterling received little boost from the increased risk appetite, as investors believe the Bank of England’s December rate hike is now significantly less likely following the emergence of the Omicron variant.
On the Brexit front, a key meeting between the UK and EU is scheduled for today, ahead of the EU-imposed deadline of 10 December for resolving the fisheries dispute.
GBP/USD technical levels:
- 52-week high: 1.4248
- 52-week low: 1.3133
- 50-day moving average (1-day chart): 1.3532
- 200-day moving average (1-day chart): 1.3793
- 14-day Relative Strength Index (RSI) (1-day chart): 30.82
Forex performance heatmap – 8 December 2021
Other currency pairs (% change from previous close):
- USD/MXN -0.2%
- USD/ZAR -0.07%
- USD/TRY +1.35%
- USD/RUB -0.19%
- USD/KRW -0.01%
- USD/CNH -0.21%
- EUR/NOK -0.48%
- EUR/SEK -0.02%
- EUR/PLN +0.27%
- EUR/HUF +0.11%
Markets in this article