Dust Settles

Reassuring reports surrounding the Omicron variant of the Covid-19 virus brought relief to riskier currencies after sharp sell-offs seen Friday, despite an expected round of travel restrictions implemented over the weekend and considerable uncertainty surrounding the threat posed by Omicron. Two South African health experts suggested that the symptoms caused by the new variant have been mild so far. The WHO have urged caution on that front, but also confirmed that the current PCR tests can detect infection with Omicron. Meanwhile, vaccine developers are racing to produce an adjusted product, with Moderna noting that they could release an updated vaccine as soon as early next year.

• JPY and CHF unwound some of their Friday gains amid reduced demand for safe havens. USD/JPY bounced from its 50-DMA, which limited losses ahead of the weekend, while Japan banned entry of all new foreigners.
• Riskier currencies went bid, with a recovery in crude oil prices lending support to commodity-tied FX. The NZD ignored comments from RBNZ Chief Economist Ha, who told the WSJ that the MPC could press pause on tightening if Omicron proves to be a "massive game changer."
• The EUR went offered across the board in a reversal of Friday surge. In their weekend comments, ECB's Lagarde and Panetta argued that the spike in inflation is linked to temporary factors.
• The weakness in Eurozone's single currency lent support to the DXY. Nevertheless, spot USD/CNH sank amid improvement in market sentiment.
• German preliminary CPI data, Swedish GDP & final EZ consumer confidence headline today's data docket. There is plenty of central bank speak coming up from members of the Fed, ECB & Riksbank.