The pound dropped to fresh year-long lows against the dollar and two-month lows against the euro on Wednesday after British Prime Minister Boris Johnson imposed tougher COVID-19 restrictions in England. Johnson advised people to work from home, whilst ordering that they wear masks in public places and use vaccine passes to slow the spread of the Omicron coronavirus variant. Sterling fell sharply as investors pared back their bets on a Bank of England interest rate hike next week, as they feared the impact the new restrictions will have on the economy. Reports show that 568 cases of Omicron are now in the country with data suggesting its doubling time of infections could be between two and three days.


The euro jumped around 0.7% against the dollar on Wednesday – its highest gain in two weeks – amid firmer market sentiment, mainly linked to Omicron and its cure. Yesterday, Pfizer Inc. and BioNTech SE said initial lab studies show a third dose of their covid vaccine promises to be an effective defence against the new Omicron variant. This is positive news for the eurozone as a large number of European nations have seen a sharp increase in covid cases over the last few weeks. Elsewhere, German data surprised the market this morning as October export figures grew 4.1%, the highest in over a year and beating expectations of a 0.9% gain, despite persistent supply bottlenecks in manufacturing.


The dollar failed to pick up ground on most major peers on Thursday as traders saw optimism in early data hinting the Omicron variant of the new coronavirus may not be as bad as feared, therefore seeing the market take a more risk-on approach. The dollar index, which measures the dollar against a basket of 6 other major currencies, remained near its one-week low of 96.012. Also on traders’ minds is the U.S. Federal Reserve’s December meeting next week, at which it could announce an acceleration of tapering of its bond-buying programme. The market will look towards today’s release of Initial Jobless Claims for a short-term direction on the dollar, with tomorrow’s inflation report offering even more direction.

Economic Calendar

13:30 US Initial Jobless Claims