It was another fairly muted session for GBPUSD yesterday, with the pound spending most of the day in the green until the back-end of the European session which saw renewed weakness upon close. This led to the currency pair recording another day of intraday losses upon close, this time caused by concerns that the variant had reached the US. However, markets are still awaiting further news on the Omicron variant, which could spark a substantial shift in risk sentiment in either direction. While initial evidence suggests the strain is more transmissible but with reduced symptoms, markets are yet to run with that idea due to the limited official backing and still concerns over vaccine efficacy. With the data calendar sparse in the UK today, focus will remain on headlines around variant transmission and any vaccine efficacy headlines.
Despite some volatility across the G10 yesterday, EURUSD has been trading within narrow ranges since Tuesday evening after volatility in the pair peaked earlier on in that day’s session. The sideways trend could continue today if there are no meaningful developments on the virus front, either in terms of a deterioration in sentiment or in terms of headlines around vaccine efficacy rates, especially as markets await tomorrow’s US jobs report. Today’s data calendar includes unemployment data from the eurozone at 10:00, although this is unlikely to be too market moving in the current environment.
The dollar split the G10 currency board in half again for the most part of yesterday’s session, as risk assets enjoyed an overdue boost given that no news on the Omicron variant was seen as good news. However, risk sentiment did sour towards the back-end of the European trading day, which resulted in a renewed haven bid and further pressure on commodities. The catalyst was the announcement that the first case of Omicron was detected in the US. This news raised concerns that very few major economies were left unexposed to the new variant, meaning the threat to global growth was quickly being realised should the variant risk be severe enough to cause renewed lockdown measures. With all the focus sitting solely on variant risks, US data passed by unnoticed by markets. The near-consensus prints in November’s ADP employment print and ISM survey data didn’t help, however. The ADP measure saw 534,000 private sector jobs added in November, while the ISM manufacturing index saw prices paid moderated further from recent highs, a sign of easing supply chain disruptions, while new orders continued to tick up. Today, jobless claims data will be viewed ahead of tomorrow’s payrolls release, while on the central bank front, Fed member Quarles shares his departing thoughts at 16:00 GMT with Bostic taking part in a Reuters event at 16:30 GMT.
The loonie was one of the few volatile currencies against the US dollar yesterday, with the fall in crude oil prices in the latter part of the trading session being the only real driver as domestic headlines remained sparse and the data calendar was empty. Brent hit another low at 68.53 yesterday evening, a level last seen in August, while WTI managed to hover just above lows from Tuesday. Today could be another volatile day for CAD as OPEC+ ministers meet to decide on the cartel’s production policy for next month. The consensus foresees a pause in the production increase, however the option of a smaller increase is also on the table. Beyond that, loonie traders will be on the lookout for virus-related headlines to get a gauge of risk sentiment ahead of tomorrow’s Canadian labour market report.