Global risk appetite remains fragile
Health Secretary Javid’s warnings that the Omicron variant was spreading at an alarming rate, especially in London were not enough to sink the Pound. Sterling opened above the 1.3200 level against the dollar. The government implored employees to work at home where possible and gave rise to hopes that a strong UK booster programme could give a relative advantage over its peers. Sterling failed to hold above 1.3250 to the Dollar and settled around 1.3220 and the Euro advanced to the 1.1710 area as global risk appetite remained generally fragile.
The Euro was hampered by concerns over the Russia-Ukraine geo-political tensions and the potential for a rapid spread of the Omicron variant across Europe. The Euro dipped to lows near 1.1260 to the Dollar before stabilising. The Dollar was moved by position adjustment ahead of Wednesday evening’s Fed Reserve policy statement. Expectations that the central bank will move towards a faster pace of slowing asset purchases and an increase in interest rate forecasts by Fed members did seem to have already been priced in.
The latest UK labour-market report recorded a larger than expected decline in jobless claims with unemployment declining to 4.2% from 4.3% while headline average earnings slowed to 4.9% from 5.8%, but above expectations of 4.6%. Reaction was muted despite firm data with Sterling holding only just above 1.3200.