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USD Forex Market Returns to Strength Amid Omicron Concerns

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  • Treasury Yields Recover Ground
  • Euro Trading Down Ahead of German Inflation Numbers
  • Stock Futures Positive After Friday Sell-Off

Friday was a major down day across the board as those trading the forex market and others dealt with the news of the latest COVID-19 variant. Now named Omicron, this wreaked havoc with sentiment in the market and resulted in a flight to safety and a broad sell-off on Wall Street. As a new week dawns, the impact of this spread is still being realized, but the US Treasury Yields have started to pick up alongside the futures trading on Wall Street. This has returned pressure, particularly to the Euro as key inflation data from Germany is awaited.

Treasury Yield Rebound Signals Positivity

The 10-Year Treasury Yield in the US, with just about everything else, saw a major decline on Friday. The number fell almost 10% with those in forex trading and around the market shaken by the latest COVID-19 variant to hit headlines. Early on Monday though, there is some confidence returning. 

This has led the 10-Year Yield higher to 1.53% through the early trading of the day which has worked to limit the upside of the Euro. In fact, the common currency finds itself under pressure again below 1.13 having taken advantage of selective Dollar weakness on Friday. The Pound has also continued to struggle, trading below 1.335.

Inflation and Policy in Focus for Euro

The important data of the day for those trading the Euro will come from Germany. The inflation data for November is due and this will give forex brokers and traders alike something to consider. Higher numbers than expected here could add further pressure to the Euro, but given the emergence of Omicron, this may well be viewed in a different light.

Inflation as a transitory pressure driven by COVID has long been the opinion of most in the ECB. This is a view that has helped policymakers in Europe remain largely supportive even now as it appeared the economy was getting back to normal. All eyes will be on any new policy measures both in Europe and the United States in response to the new variant. 

Stocks Looking to Bounce Back

Wall Street also suffered on Friday. The Dow Jones was down more than 1,000 points for the day at its lowest prior to a recovery of sorts to end the day strongly but still far from positive territory. With more confidence evident in treasury yields, it also appears this will push over into the stock market. US futures are already trading positively despite much uncertainty about the spread of the new variant. 

This has been showcased in the early hours by European markets that look set to bounce back very strongly on Monday. The major US indices will look to follow suit, and stay close to any policy adjustments the Fed may make. Key data for the week ahead also includes a positive-looking jobs report for November with analysts predicting 581,000 jobs added.

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.

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