This week saw investors trying to assess the threat of the omicron variant. The variant seems to be more transmissible, but is it more deadly? Do existing vaccines work? If so, how well? These are some of the key questions. One thing to remember is that the latest variant fears broke over the US Thanksgiving, a lower liquidity session, so any moves were likely to be exacerbated by this. If markets are reassured that the omicron variant is not as much of a threat as initially feared, then expect a retracement higher in oil, risk pairs like the NZDJPY, and stocks.

Other key events from the past week

  • JPY: Recent weakness unwound, Nov 29: The JPY and the CHF found strong bids to start the week on fears over the new omicron variant. If these fears are unfounded watch out for a sharp snap higher in the NZDJPY pair as the RBNZ have recently revised their interest rate expectations higher.
  • USD: Dollar strength, Nov 30: The USD found some strength midweek as Jerome Powell suggested that it is a good time to retire the ‘transitory’ reference for inflation. This boosted the USD midweek on faster Fed taper expectations.
  • US oil: Omicron fears hit price, Dec 01: Oil markets fell heavily at the start of the week as fears that a vaccine-resistant omicron virus would smash oil demand once again. If the omicron variant is actually found to be countered by existing vaccines, then watch out for a sharp snap back higher in oil.

Key events for the coming week

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