Safe haven currencies slip amid waning Omicron jitters; cyclical currencies shine
Overnight, President Joe Biden’s statement that there is a significant chance that he strikes a deal with Democrat Senator Joe Manchin to pass his $2 trillion stimulus package through Congress, has been the driving force behind the soaring risk-on sentiment in markets. In addition, optimistic news from the pandemic front alongside statements from major countries’ government officials ensuring that financing aid will be provided in case new Covid-19 restrictions are imposed, further ignited risk appetite earlier today. However, the Omicron repercussions are still in play, partially offsetting the risk-on sentiment.
As a result, the US dollar is giving up ground, also being pressured by the retreating long-term Treasury yields. Moreover, the Swiss franc and Japanese yen are also getting hammered in the current session as the improving risk tone poses a threat to their safe haven demand.
On the other hand, the commodity-linked currencies such as the aussie, loonie and kiwi are the relative winners in the forex spectrum today, capitalizing on surging commodity prices. Furthermore, the euro is also stronger on the day without any major headlines behind this uptick, while the British pound is in the green today after the government announced that there will be no further restrictions for the Christmas holiday period.
The Turkish lira has bounced back from its peak of $18.36 and keeps recouping more of its losses, trading at $12.10 at the time of writing, but the upside potential for the currency seems limited due to the country’s severe macroeconomic weaknesses.
Stock markets retreat as markets grapple with Omicron fears
Wall Street is set to open lower today despite yesterday’s rally, with e-mini futures for the major US indexes dipping in premarket trade. More specifically, Dow Jones, S&P 500 and Nasdaq futures are 0.3%, 0.25% and 0.10% down respectively. Moreover, most major European indices quickly pared their morning gains as Omicron fears re-emerged.
Oil marginally lower; gold and natural gas surge
Oil prices surrendered their early-session gains as lingering concerns over the Omicron variant continue to undermine investors’ risk appetite. Alternatively, gold is appreciating today, capitalizing on the falling long-term US Treasury yields and the softer dollar. Moreover, European gas prices continue to climb as flows from a key Russian pipeline stopped due to extreme weather conditions.
