Covid at airport

Risk off again as Moderna CEO issues warning

Jeremy Thomson-Cook
Jeremy Thomson-Cook 30 November 2021

GBP: Treads water

EUR: German inflation soars

USD: Biden “no shutdowns”

 

Sterling

Sterling traded in a very tight range yesterday as broader market sentiment improved following reports over the weekend that the new Omicron Covid may not be resistant to existing vaccines.

After Friday’s big risk off moves markets have been quick to reprice interest rate hike expectations, reducing the probability of a UK December rate hike from 100% down to 30%. With over three rate hikes still priced in for next year there is still room for markets to adjust further and chip away at £’s main anchor.

 

Euro

Despite data out from Germany yesterday showing inflation hitting record levels the ECB were quick to repeat their “inflation is transitory” mantra, and indeed the German finance Minister went one step further by saying inflation had peaked in November.

The single currency attracted large risk aversion flows on Friday, but with markets bouncing back yesterday the Euro continued on its downward trajectory. The negative Omicron news this morning is already pushing the euro back up towards Friday’s highs. Markets will be keenly watching the EU inflation data due out at 10am this morning.

 

US dollar

The dollar fell from its recent highs yesterday as markets tried to stage a recovery following some of the biggest downward moves of the year.Sentiment was further boosted by comments from President Biden stating “there will be no shutdowns or lockdowns this winter”.

Other than Omicron news, the main market focus today will be on Fed Chair Powell and Treasury Secretary Yellen appearance this afternoon before the Senate banking committee.

 

Elsewhere

Negative Omicron news breaking this morning from the Moderna CEO stating “There is no world where the vaccine effectiveness is the same level” and “all the scientists I talk to said this is not going to be good” have immediately sent equity markets lower (erasing all of yesterday’s gains) and Bond markets higher as fear once again rips through the capital markets.

We expect continued volatility as markets await further data from Governments/drug companies around the globe as to the efficacy of current vaccines against Omicron.

 

Market rates

Today's Interbank Rates at 08:45 against sterling movement vs yesterday.

Euro €1.176 ↓
US dollar $1.332 ↓
Australian dollar $1.872 ↑
South African rand R21.47 ↓
Japanese yen ¥150.8 ↓

 

Have a great day.