Thailand currency

What are the currency effects?

A weekend of bad news drove the markets down sharply at Monday’s opening.

The Netherlands has imposed a strict lockdown and many other countries are considering further restrictions.

The euro has again shown relative strength, but is far from completely reversing as the EURUSD remains in a consolidation pattern.

Monday’s session starts lower with strong sells in Asia and stock market futures in Europe and the United States. The Dax is down -3% with the FTSE just behind with a -2% drop from Friday’s close. The weekend news signaled further lockdowns in Europe and the threat of more to come. After last week’s hawkish moves by three central banks (the Fed, BoE and even the BoJ), the market appears susceptible to any negative news and is more vulnerable to volatility as central bank liquidity dwindles.

Other markets also reflect the risk environment. Oil is down -5% as new Covid lockdowns once again threaten demand. Currencies, on the other hand, are showing noticeable strength in the euro, which was also the case during Omicron’s initial panic. The US dollar is lower against the euro and the yen. This does not necessarily mean that the euro is replacing the USD as a safe haven during times of risk, but it is because the euro has very few hawkish expectations for the ECB. When the markets turn sour, all currencies with hawkish expectations drop as those expectations are lowered a notch. This bias is clearly still on unstable ground.

No more locks

Whether or not Omicron has milder symptoms doesn’t seem to matter to some governments as new restrictions are being imposed due to higher infection rates. This was the case in the Netherlands over the weekend, as a strict lockdown was imposed on Christmas and New Years.

“The Netherlands is closing again. This is inevitable due to the fifth wave coming to us with the Omicron variant,” Prime Minister Rutte said. Failure to act now would likely lead to “an unmanageable situation in hospitals,” he said.

All non-essential businesses and services, including restaurants, hairdressers, museums and gyms, will be closed Sunday through January 14, and all schools will be closed until at least January 9.

bannerItaly is also set to review imposing new restrictions, and the UK has warned of the potential for further measures. Deaths caused by Omicron have been steadily increasing, which is of concern. Justice Secretary Dominic Raab told Time Radio:

“We currently have 104 Omicron-based hospitalizations, we have had 12 deaths. But there is a time lag in the data so we don’t really know how bad that will be. “

Travel has been badly affected and what is usually a busy time for airlines and hotels could be a failure again. France has already banned tourists from the UK and Thailand is considering reinstating mandatory quarantine.

Currency effects

This wave of bad news for the markets could be ignored as was Omicron’s initial panic, but last week’s series of central bank meetings made it clear that the hawkish path would be maintained despite the evolution of the market. pandemic. Bad news therefore no longer means more complacency and more support from central banks. This is quite a change the markets need to adjust to and it could mean the selling will continue through Christmas. It could also mean that the euro does not regain as much relative strength as at the end of November, as Omicron is unlikely to cause a central bank turnaround. EURUSD rebounded to 1.126 but remains in a consolidation pattern at the bottom of its strong downtrend. Only a move above 1.14 would really start to look like a true bullish reversal and a break below 1.18 would signal a further decline.