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Dollar steady as traders wait for central banks, pound inches lower on COVID fears
Published by maria gbaf
Posted on December 13, 2021
3 min readLast updated: January 28, 2026
Global Banking & Finance Review®
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Published by maria gbaf
Posted on December 13, 2021
3 min readLast updated: January 28, 2026
The dollar remains stable as central banks prepare for meetings, while the pound dips on Omicron concerns. Key currency movements expected this week.
By Alun John
HONG KONG (Reuters) – The dollar was quiet at the start of a week in which central bank meetings, including by the Federal Reserve, will likely drive currency markets, while sterling fell slightly after Boris Johnson warned about the impact of the new COVID-19 variant.
The dollar index, which measures the greenback against a basket of six major peers, was little changed at 96.091, down from as high as 96.938 in mid November, before news of the omicron variant of the new coronavirus became widespread.
On Monday, the euro inched higher to $1.1316 while the yen lost a little ground to 113.51 per dollar.
The pound slipped 0.1% to $1.3257 after British Prime Minister Johnson on Sunday said Britain faces a “tidal wave” of the Omicron variant of coronavirus and that two vaccine doses will not be enough to contain it.
Markets have swung widely since the new strain emerged due to worries it could have a major impact, initially driving flows to safe-haven assets. Reports that it may not be as bad as feared caused these flows to reverse last week.
“All I want for Christmas is clarity,” analysts at Barclays headlined a research note.
Breaking news about the Omicron variant aside, the most significant scheduled events for currency markets this week are central bank policy meetings, with six of the G10 central banks and a number of emerging-market central banks set to meet.
“Central banks will need to strike a difficult balance between Omicron-induced uncertainty and elevated inflation levels,” the Barclays analysts said.
The most important is the Federal Reserve’s two day meet which wraps up on Wednesday.
Investors now expect the Fed to announce an acceleration of tapering its bond buying programme, opening the door to at least one interest rate hike next year.
Traders now see a more than 50% chance of a rate hike by May 2022, according to the CME Group’s FedWatch programme.
An acceleration of tapering would likely support the dollar particularly versus currencies whose central banks will likely be slower to tighten.
“The Fed meeting certainly could prove the catalyst for EUR/USD to break down to 1.10. Though investors may prefer to wait from the ECB-POLICY-3fdc7763-f2c0-4c30-b494-8614852eaf43>ECB-POLICY-CENTENO-a52f21b9-8975-4dc5-9a21-8c5e8267aa43>ECB-POLICY-3fdc7763-f2c0-4c30-b494-8614852eaf43>ECB the next day before chasing the move. USD/JPY could also be pressing 115 post Fed,” said ING analysts in a note.
Both the European Central Bank and the Bank of Japan will review their policy settings this week. Market players are starting to talk about the possibility of the ECB-POLICY-3fdc7763-f2c0-4c30-b494-8614852eaf43>ECB-POLICY-CENTENO-a52f21b9-8975-4dc5-9a21-8c5e8267aa43>ECB-POLICY-3fdc7763-f2c0-4c30-b494-8614852eaf43>ECB turning more hawkish, while the BoJ is likely to remain dovish.
Also holding meetings are the Bank of England, and the Norwegian and Swiss central banks.
Bitcoin was trading just under $50,000 after the world’s largest cryptocurrency climbed a little over the weekend, but still has work to do to reclaim November’s record high of $69,000.
(Reporting by Alun John; Editing by Stephen Coates)
The article discusses the stability of the dollar and the impact of central bank meetings on currency markets, with a focus on the pound's reaction to Omicron fears.
The pound has slightly decreased due to concerns over the Omicron variant, as highlighted by British Prime Minister Boris Johnson.
Investors expect the Federal Reserve to announce an acceleration of tapering its bond-buying program, potentially leading to a rate hike next year.
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