- Gold up $15 to $1804
- S&P 500 up 47 points to 4695
- WTI crude oil up $1.81 to $72.93
- US 10-year yield down 3 bps to 1.45%
- AUD leads, JPY lags
The market continues to take a much better view of omicron as data rolls in that shows less-severe infections, even as the number of overall cases rises. The thinking is that omicron will offer a level of natural immunity and I’m increasingly of the belief that the mildness of omicron will cause a change in the political mood away from lockdowns and school closures. Ultimately that change will bring economies back to ‘normal’ and towards a strong year, at least once we get through Jan/Feb.
The sentiment translated into a strong bid in the commodity currencies and selling in USD and JPY. The Aussie was relentlessly bid in a steady fashion to 0.7217 from 0.7125 early in Europe. NZD/USD followed almost tick-for-tick. Notably, AUD/JPY briefly broke above last week’s high of 82.44 but is on track to close just below.
The loonie was slow to join in the party but eventually did, especially as oil prices rallied 2.5% after starting North American trade flat. Much of that came after the US inventory report and data showing strong gasoline demand. USD/CAD fell to 1.2836 in a 70 pip decline, finishing near the lows of the day.
At times, the euro has traded inversely to the risk mood on the belief that rates there are pinned but that wasn’t the case today. Perhaps that’s a follow up to the higher ECB rate forecasts or to eye-watering European gas and power prices. EUR/USD managed to grind up to 1.1322.
Cable was also strong, adding more than 100 pisp from the European open with particularly strong flows through the London fix. That move might belie that flows are the real driver here but there’s a broader signal for the market as covid cases in the UK hit records: The virus doesn’t matter.
US Treasury yields didn’t offer the same sort of positive take and that surely helped to cap USD/JPY gains. The pair tried the upside several times but stumbled late and is on track to finish flat.