Curreny Commentary

State Street Global Advisors
By January 4, 2022 08:55

Curreny Commentary

Macro Environment

The emergence of the omicron coronavirus variant was the dominant risk event in November and could have an important impact on currency and risky asset markets over the next few months. But before we get to that, it’s important to recognize that FX markets were already experiencing substantial moves on the back of increasing differentiated monetary policy and growth outlooks before the omicron news broke. Overly optimistic monetary policy expectations and strong commodity prices in October gave way in November as central banks pushed back on those market expectations and the combination of the COVID-19 surge in the EU, driven by the delta variant, and the US release of oil from its strategic petroleum reserve pushed energy prices lower. Between October month end and November 25, pre-omicron, the Norwegian krone fell nearly 6% vs. USD and the Australian and New Zealand dollars fell more than 4% vs. USD. The euro and Swedish krona benefit from weaker energy prices but suffered from the EU COVID surge and chronically low interest rates. Relative to the G-10 average, EUR lost more than 3% and SEK lost more than 5% vs. USD by November 25. 

State Street Global Advisors
By January 4, 2022 08:55

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