Dollar steady as traders wait for central banks, pound inches lower on COVID fears

Economy 29 minutes ago (Dec 12, 2021 08:17PM ET)

© Reuters. FILE PHOTO: A picture illustration shows U.S. 100-dollar bank notes taken in Tokyo August 2, 2011. REUTERS/Yuriko Nakao

By Alun John

HONG KONG (Reuters) - The dollar was quiet at the start of a week in which central bank meetings, including by the Federal Reserve, will likely drive currency markets, while sterling fell slightly after Boris Johnson warned about the impact of the new COVID-19 variant.

The dollar index , which measures the greenback against a basket of six major peers, was little changed at 96.091, down from as high as 96.938 in mid November, before news of the omicron variant of the new coronavirus became widespread.

On Monday, the euro inched higher to $1.1316 while the yen lost a little ground to 113.51 per dollar.

The pound slipped 0.1% to $1.3257 after British Prime Minister Johnson on Sunday said Britain faces a "tidal wave" of the Omicron variant of coronavirus and that two vaccine doses will not be enough to contain it.

Markets have swung widely since the new strain emerged due to worries it could have a major impact, initially driving flows to safe-haven assets. Reports that it may not be as bad as feared caused these flows to reverse last week.

"All I want for Christmas is clarity," analysts at Barclays (LON: BARC ) headlined a research note.

Breaking news about the Omicron variant aside, the most significant scheduled events for currency markets this week are central bank policy meetings, with six of the G10 central banks and a number of emerging-market central banks set to meet.

"Central banks will need to strike a difficult balance between Omicron-induced uncertainty and elevated inflation levels," the Barclays analysts said.

The most important is the Federal Reserve's two day meet which wraps up on Wednesday.

Investors now expect the Fed to announce an acceleration of tapering its bond buying programme, opening the door to at least one interest rate hike next year.

Traders now see a more than 50% chance of a rate hike by May 2022, according to the CME Group's (NASDAQ: CME ) FedWatch programme.

An acceleration of tapering would likely support the dollar particularly versus currencies whose central banks will likely be slower to tighten.

"The Fed meeting certainly could prove the catalyst for EUR/USD to break down to 1.10. Though investors may prefer to wait from the ECB the next day before chasing the move. USD/JPY could also be pressing 115 post Fed," said ING analysts in a note.

Both the European Central Bank and the Bank of Japan will review their policy settings this week. Market players are starting to talk about the possibility of the ECB turning more hawkish, while the BoJ is likely to remain dovish.

Also holding meetings are the Bank of England, and the Norwegian and Swiss central banks.

Bitcoin was trading just under $50,000 after the world's largest cryptocurrency climbed a little over the weekend, but still has work to do to reclaim November's record high of $69,000.

Dollar steady as traders wait for central banks, pound inches lower on COVID fears

Related Articles

Bitcoin rises 2.1% to reclaim $50,000 By Reuters - Dec 12, 2021

(Reuters) - Bitcoin rose on Sunday to reclaim levels above $50,000. The world's biggest and best-known cryptocurrency gained 2.11% to $50,445.34 at 1803 GMT on Sunday, adding...

Dollar loses ground after U.S. inflation data By Reuters - Dec 10, 2021

By Sinéad Carew (Reuters) - The dollar lost some ground on Friday after U.S. consumer prices increased roughly in line with expectations in November as investors, who had been...

Dollar Static Ahead of Key CPI Release; Sterling Flat After GDP Data By Investing.com - Dec 10, 2021

By Peter Nurse Investing.com - The dollar was largely unchanged in early European trade Friday ahead of the release of key U.S. inflation data, which could influence Federal...

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

December 13, 2021 at 01:17PM
Reuters
https://ift.tt/31RKDmW