The dollar failed to benefit from firm data or higher yields and posted significant losses on the day.

Global risk appetite has been mixed with uncertainty and conflicting reports surrounding the Omicron variant. US bond yields moved higher amid expectations of Fed tightening.

There was choppy trading on Wall Street with limited net gains on tentative Omicron optimism. Asian equity markets were mixed with fragile sentiment offset by short covering.

The dollar failed to benefit from firm data or higher yields and posted significant losses on the day. The Euro was resilient and EUR/USD advanced to 1.1350 on short covering before fading slightly. Sterling was undermined by a tightening of coronavirus restrictions, but GBP/USD recovered from fresh 2021 lows.

The Australian dollar posted further gains with short covering also a feature. The Canadian dollar, however, posted losses with no further hawkish move by the Bank of Canada.

The Euro drifted lower into Wednesday’s New York open with a EUR/USD retreat towards 1.1270, although there was choppy trading with fluctuations in risk appetite as markets continued to monitor global coronavirus developments. Caution ahead of forthcoming policy meetings also curbed aggressive position taking.

ECB Vice President de Guindos stated that there was no evidence d second-round inflation effects, maintaining a dovish stance ahead of next week’s policy meeting, although Euro selling pressure was limited with the currency able to demonstrate some resilience.

There were expectations that the Federal Reserve would take a hawkish stance at next week’s policy meeting and potentially sanction a faster rate of stimulus withdrawal by accelerating the rate of tapering of bond purchases. Markets will also be monitoring rhetoric surrounding interest rates within the statement.

The dollar, however, was unable to make headway after the US open with EUR/USD making a move to above the 1.1300 level.

US JOLTS data registered an increase in job openings to 11.03mn for October from a revised 10.6mn the previous month and well above consensus forecasts of 10.4mn with the data continuing to indicate a tight labour market, although there was a slight moderation in the quits rate.

The dollar was unable to gain any support from the data and EUR/USD continued to move higher with a peak around 1.1350. The Euro edged lower in early Europe on Thursday and EUR/USD traded around 1.1330 with some retracement on the crosses as markets continued to monitor risk conditions closely.

There were mixed developments surrounding the Omicron variant with a brief dip in risk appetite into the New York open. Pfizer commented that a third vaccine dose was effective against the Omicron variant which triggered a recovery in risk appetite, although there were still concerns over the potential stresses given difficulties in administering additional vaccines and reservations over the impact of a sharp increase in infection rates.

Treasuries overall lost ground with the 10-year yield moving above the 1.50% level which provided net dollar support and a USD/JPY move towards the 114.00 level. Wider US losses limited the potential for further support and there was a drift towards 113.60.

Chinese CPI inflation increased to 2.3% for November from 1.5% previously, but slightly below consensus forecasts of 2.5% while PPI inflation moderated to 12.9% from 13.5%, but above expectations of 12.1%. Chinese equities posted net gains, although regional bourses were mixed during the day.

The dollar was unable to make headway during the Asian session with USD/JPY settling around 113.60 and EUR/JPY around 128.60.

Sterling was unable to make any headway in early Europe on Wednesday and gradually lost ground ahead of the New York open. Risk appetite dipped on renewed reservations over coronavirus developments although, significantly, the Pound failed to recover when risk conditions improved once again.

Sterling was hampered by further difficulties for Prime Minister Johnson and the government. There were also media reports that the government will introduce fresh restrictions in order to curb spread of the Omicron variant which would further damage the outlook.

Any further restrictions would also make it less likely that the Bank of England will raise interest rates at next week’s policy meeting and money markets continued to drift lower with the probability of an increase dipping to below 50% which sapped UK currency support.

GBP/USD dipped to fresh 2021 lows at 1.3170 before a recovery back to the 1.3200 area while GBP/EUR posted sharp loses to 1.1640. Dollar weakness allowed a further net GBP/USD recovery to 1.3230 at the New York close.

Sentiment remained fragile and the government confirmed that there would be a move to Plan B restrictions in England with a renewed directive to work from home if possible. The UK currency was unable to make headway on Thursday and GBP/USD traded only marginally above 1.32.

Economic Calendar

13:30USD Initial Jobless Claims213K222K
13:30USD Continuing Jobless Claims1902K1956K
15:00USD Wholesale Inventories1.00%1.40%
21:45NZD Electronic Card Retail Sales (Y/Y)(OCT 08)-7.60%
21:45NZD Electronic Card Retail Sales (M/M)(OCT 08)10.10%

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.