New variant sends markets into risk-off mood

Jeremy Thomson-Cook
Jeremy Thomson-Cook 26 November 2021

GBP: Sterling/risk correlation sends the pound lower

EUR: A rare euro gain derived from safe-haven flows

USD: Thanksgiving hangovers settle in with US Equities lower

Sterling

Sterling markets were muted yesterday with minimal economic data released, offering the pound a refreshing break against the rampant dollar. The new Covid variant found in Southern Africa has dominated markets this morning as a risk-off tones dent sterling crosses. We have no data releases scheduled for today from the UK, however, MPC member and Chief Economist Pill is due to speak on the current economic outlook. However, the focus will likely be around the UK’s emergency Covid meeting with the World Health Organisation later today.

 

Euro

The euro traded in a relatively right range yesterday despite the ECB minutes stating the importance of keeping 'sufficient optionality to allow for future monetary-policy actions, including beyond its December meeting’. It is also key to remember that the central bank did not touch upon rising Covid cases across Europe. The euro opens higher this morning as the currency benefits from its ‘safe-haven’ status, sending the single currency higher this morning.

 

US dollar

Dollar markets were sparse yesterday as Americans celebrated Thanksgiving and like the Euro, traded within a tight range. US equities and oil prices fell sharply this morning, as investors fled from riskier assets after the detection of a new and possibly vaccine-resistant coronavirus variant, which in turn strengthened safe-haven assets like the dollar, Swiss franc, Euro and yen. With most of the US is still off celebrating, the continued volatility is expected throughout today’s session.

 

Elsewhere

The new travel restrictions from the UK sent the South African rand down as much as 1.3% to R16 against the buck, marking the Rand's lowest level in a year. Commodity currencies are also on the backfoot following the same route into safe-haven assets. The AUD, NZD and NOK are all lower this morning. 

 

Market rates

Today's Interbank Rates at 09:53am against sterling movement vs yesterday.

Euro €1.182 ↓
US dollar $1.331 ↓
Australian dollar $1.868 ↑
South African rand R21.68 ↑
Japanese yen ¥151.7 ↓

 

Have a great day and a better weekend.