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Markets tumble after first US Omicron case reported

Lawrence Kaplin
Lawrence Kaplin 02 December 2021

GBP: US to delay UK trade deal 

EUR: Weak German retail sales 

USD: Rebounds on vaccine efficacy fears  

Sterling

With no economic data released yesterday, sterling remained within its recent trading range, in line with the ebb and flow of broader market sentiment. Ahead of Friday’s next round of UK/EU Brexit negotiations, news that US is to delay trade talks over post Brexit concerns regarding the Northern Ireland protocol added further uncertainty to the outlook for sterling.

With no UK economic data scheduled to be released today, once again sterling will likely take its lead from other markets.

 

Euro

The euro initially fell yesterday morning following a weaker than forecast German retail sales report before attracting risk-off flows late in the afternoon after news of the first US omicron patient sent markets tumbling. Gas prices into the EU are once again soaring, threatening the nascent recovery, and with the ECB remaining steadfast that interest rates will not be rising next year the euro continues to remain vulnerable.

A light economic calendar today with only EU unemployment data slated for release at 10am.

 

US dollar

After a much calmer trading session in Europe, news late afternoon of the first Omicron case in the US sent risk markets tumbling once again. Wall St quickly reversed earlier gains falling 1000 points, oil fell 5%, sending risk-off currencies USD, JPY, CHF and EUR all higher with risk-off currencies GBP, CAD, AUD all suffering big losses.

Markets took a further leg downwards after it was revealed the patient was fully vaccinated and comments from the CDC that Omicron might be more transmissible and evade current vaccine protection.

In economic news, ahead of Friday’s key Government monthly employment report, yesterday’s ADP private employment report came in stronger than forecast, and in line with the 550k employment increase expected for Friday’s numbers.

Fed Chair Powell’s 2nd day of testimony was largely a re-run of the previous day, whereby markets were taken completely by surprise by the announcement that the Fed is looking to taper its asset programme months earlier and therefore look to raise interest rates sooner than the markets had priced in.

Weekly jobless claims are due to be released later today but ahead of tomorrow’s jobs data, markets are once again likely to take their cue from Omicron news.

 

Market rates

Today's Interbank Rates at 07:27 against sterling movement vs yesterday.

Euro €1.174 ↑
US dollar $1.328 ↓
Australian dollar $1.869 ↑
South African rand R21.22 ↑
Japanese yen ¥150.4 ↓

Have a great day.