New variant of coronavirus - Omicron - sent shockwaves across the global financial markets on Friday. While risk assets recovered somewhat on Monday, another wave of selling arrived today. Potential disruptions in the global economy triggered by Omicron pose a significant risk to the growth outlook.
Chairman of the Federal Reserve, Jerome Powell, will hold the first of two congressional testimonies this week (today and tomorrow at 3:00 pm GMT). While the event is related to Powell being nominated for the second term at the helm of Fed, questions about the current situation are likely to be asked. According to a pre-released text of the testimony, Powell will say that previous waves of the pandemic had a great impact on the labour market and the economy with people being afraid to go to shops, restaurants or offices. Such cautious comments hint that the Federal Reserve may wait to see how the Omicron situation develops and, in turn, delay further policy tightening. On the other hand, while Powell once again said he believes inflation pick-up to be transitory, he also said that higher price growth will linger well into 2022.
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Open account Try demo Download mobile app Download mobile appIt looks like markets have been pricing more dovish Fed since Friday. A look at the US dollar index (USDIDX) shows us that the index halted advance at the end of the previous week and started to move lower. USDIDX quickly pulled back below the 50% retracement of 2020 drop and moved back into the range of the earlier-broken upward channel. Key near-term support to watch can be found ranging between 94.50 handle and 38.2% retracement.
Source: xStation5
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