Lockdowns return and weigh on certain currencies

Market Update

As the new trading week commences new lockdown measures are already starting to dominate the narrative, with the British pound gapping lower on the open after British PM Boris Johnson announced tightening restriction on the country.

Johnson announced the new measures after rising Omicron cases over the weekend, which could potentially harm the economic growth of the United Kingdom. It should be said that sterling has retracement of the gap, alongside over pound crosses.

UK stocks has so far showed a muted reaction, as the FTSE100 trades higher on the day. As usually with these COVID-19 measures, some companies and sectors will do better than others, and many FTSE100 listed companies have much of there business abroad, such as the mining sector.

Asia is also shrugging-off the news that 12 large Chinese companies have suspended production due an outbreak in a key manufacturing province inside the world’s second-largest economy.

The USDJPY pair has been active this morning and gapped lower on initial risk-off sentiment. The Band of Japan Tankan report for the fourth fiscal quarter also registered a small improvement.

Oil prices are also moving higher alongside US futures as US traders focus on the narrative that Omicron is less deadly than fearer. The major US indices are roaring higher, especially the Dow Jones Industrial Average.

Bitcoin has suffered heavy losses this morning after moving towards $50,600 over the weekend alongside other major cryptos due to the news that Binance has removed a request for an exchange license in Singapore.

Week Ahead

The week ahead is set to be dominated by central bank meetings, with the FED likely to be the major market moving event amongst the four central banks that are going to meet this week.

The Federal Reserve are widely tipped to be more hawkish in their language, with many of the major banks agreeing that we are going to see a quickening of tapering and more conviction over coming rate hikes.

The European Central Bank is expected to keep ‘transitory’ language this week and will likely offer guidance on APP purchases for next year. The euro is probably going to suffer further if we see the ongoing policy divergence between the FED and ECB.

Economists are giving the BOE a 50 percent chance that central bank will hike rates this time around. The Swiss National Bank policy meeting is expected to be non-event as they stick with the same line as the November meeting.