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29.11.202109:45 विदेशी मुद्रा विश्लेषण और समीक्षा: Markets reacted unreasonably in a panic to the appearance of a new strain of COVID-19. Overview of USD, EUR, and GBP

News about the emergence of a new strain of coronavirus, dubbed Omicron, sent markets into a panic last Friday. Despite the fact that little is known about the new strain yet, traders chose to be safe and sharply reduced the demand for risk, which led to a collapse in oil prices, a large-scale fall in stock indices, and an increase in demand for bonds.

In addition to panic sales, Omicron has already caused one consequence – OPEC+ countries postponed a meeting for several days to better assess the impact of the new strain on the market. Thus, OPEC+ hinted to the markets that if the quotes do not recover, then the production growth plan for monthly + 400 thousand barrels can also be revised per day. Most likely, oil quotes will resume their growth.

The fall in prices, as well as Powell's reappointment as the Fed chairman, will help reduce inflationary pressures, which have become dangerously high. In general, we can expect that the current panic will contribute to a reduction in inflation expectations, which is a plus from the point of view of achieving financial stability.

Exchange Rates 29.11.2021 analysis

Meanwhile, there is no data yet that Omicron is more dangerous than Delta strain, which was reported by WHO in a special statement on Sunday. Moreover, as historical experience shows, mutations usually weaken the virus rather than strengthen it, so even higher contagiousness of Omicron does not mean a more severe course of the disease, but rather, on the contrary, a lighter one. Nevertheless, the markets will need time to calm down.

On Thursday, banks and financial institutions were not working in the United States in celebration of Thanksgiving, so the release of the weekly CFTC report was postponed from Friday to Monday.

EUR/USD

Eurozone's GDP growth rates are estimated to be lower than in the US and the UK. Inflationary pressure is also weaker and should fall below 2% in 2023, which gives reason to assume that the ECB rate hike will not take place at all in the near future or, more precisely, if the ECB rate hike takes place earlier than 2024, then both the Fed and the Bank of England will do it at least much later, which makes the euro an outsider of the currency market according to expectations. In any case, there are no fundamental reasons for the euro's growth at the moment.

Without considering the CFTC data, the general trend for the euro has not undergone any changes over the week. The estimated price is confidently directed downwards, which does not yet give the euro a chance to make an upward turn. Apparently, the currency market will go on this year without the traditional New Year rally.

Exchange Rates 29.11.2021 analysis

The euro tried to consolidate below the support zone of 1.1270/1310, but while unsuccessful, bearish pressure will most likely increase. We expect that the long-term target of 1.10, which seemed extremely unlikely until recently, will become the main benchmark for the euro this week.

GBP/USD

The Bank of England is likely to start the tightening cycle earlier than the ECB, which gives the pound a better chance of resuming growth. There is a certain probability that the first rate increase will occur this year. If it happens, the pound will be the first of the world currencies to turn to growth. It is slightly more likely (in any case, most major banks adhere to this scenario) that the Bank of England will make the first increase in February, besides, it is necessary to assess the impact of Omicron – if oil prices remain under pressure, then the BoE will have reasons not to hurry, and the pound, accordingly, will remain under pressure.

The dynamics of the pound did not break out of the general market trend. Given the rather strong raw material component in the overall structure of trading for the pound, the fall in oil prices could not but pull the pound along with it.

Exchange Rates 29.11.2021 analysis

It can be assumed that the decline will continue. The chances of GBP/USD returning to the resistance zone of 1.3550/70 are considered low. The target is at 1.5150/70, which is the lower border of the channel, and the 38.2% correction from the high of 1.4244, remains relevant as of Monday morning.

*यहां पर लिखा गया बाजार विश्लेषण आपकी जागरूकता बढ़ाने के लिए किया है, लेकिन व्यापार करने के लिए निर्देश देने के लिए नहीं |

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