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Covid variant concerns rock markets

Covid variant concerns rock markets

Last week, Covid-19 developments in relation to fears over a new variant had a heavy impact on markets with the Euro Stoxx 50 falling by 4.7% on Friday alone, finishing the week down by 6%. As expected, the yen (safe haven currency) made some gains amid the nervous tone amongst traders. 

The euro also made up some lost ground against the dollar and sterling as the market reassessed the rate hikes from both the Fed and BoE in light of the concerning Covid-19 newsflow. EUR/USD pushed back up towards the $1.13 zone, despite having briefly fallen below the $1.12 mark earlier in the week. We also saw EUR/GBP edge back up towards  the 85p mark on Friday having spent much of the week pinned down at 84p. 

Sterling held a generally softer tone against the dollar over the course of the week, with the currency trading in the lower half of $1.33-1.34.

As we look to the week ahead, the main data highlights are US payrolls and flash reading of Eurozone inflation. However, expect market attention to be more focused on Covid-19 developments, which holds the potential for extremely volatile trading conditions.

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