Today the market is showing a move that tends to choose to take risky holdings today in the hope that the Omicron Covid-19 variant will have less impact on the economy and monetary stimulus in China. The Australian currency is recovering and the euro is down to a 2021 low.
Global stock markets and oil prices showed a good consolidation prompting traders to let go of safe-haven currencies and bonds as the market expressed such optimism citing reports that the Omicron variant showed only mild symptoms.
On Sunday, top U.S. health official Anthony Fauci noted that so far there have been no harmful symptoms. On the other hand, developments in China, contributed to a risky tone, following the People’s Bank of China (PBOC) saying it would lower the amount of cash that banks must keep in reserves. This is the second step that can be interpreted as one of the ways to stimulate the economy.
The PBOC also reduced the lending facility rate by 25 basis points to support the rural sector and small firms.
The euro was down 0.3% at $ 1.1255 after struggling to recover since hitting a 2021 low last month following expectations that the U.S. Federal Reserve. will tighten policy faster than the dovish European Central Bank.
German investor sentiment eased in December as a fourth wave of COVID-19 infections and continued supply congestion in manufacturing clouded the growth prospects of Europe’s largest economy.
The New Zealand dollar traded higher, up 0.2% to $ 0.6769 and the British pound was stable at $ 1.32495. The Australian dollar, seen as a proxy for market risk appetite, strengthened 0.8% to a trading level of $ 0.7105.
In the meeting, the Reserve Bank of Australia did not make any policy changes but stressed that Omicron is unlikely to affect the country’s economic recovery. Analysts said market speculation about a faster reduction in central bank bond purchases also supported the currency.
The market focus is now on the actions of the Fed and the central banks of major economies.
