"Omicron-hysteria" completely seized the world, which eventually affected the financial markets. By the end of Monday, all segments of the global financial market – stock, foreign exchange, and commodity markets were under a serious blow. The news about the first deaths of people due to Omicron raised fears that the world's economic growth may noticeably decline, and hence the demand for the commodity, raw assets, and a possible slowdown in business activity will have a strong impact on the demand for company shares.
But when Tuesday came, the mood of investors changed dramatically, overshadowing the COVID-19 topic. The Asian financial market slowly rose on the wave of the growth of futures on American stock indices, which will definitely lead to a positive opening of trading in Europe with all the ensuing consequences. The increase in positive sentiment will stimulate not only the demand for stocks but also for commodity assets, while the dollar exchange rate will traditionally remain under pressure.
Before the opening of the European trading session, the US currency was weakening against all major currencies except the yen and franc, which previously received support as safe-haven currencies.
Observing everything that is happening, it is possible to state with a high degree of probability the beginning of the Christmas rally, which will take place before the new year and will end in the first days of the next.
Now, let's try to figure out what can be expected in the markets at the beginning of next year.
We believe that the coronavirus pandemic topic will dominate the media, which will cause hysterical outbursts among investors. This will be expressed in local decreases in asset values, which will naturally encourage professional market participants to immediately select these financial instruments and profit from their local value growth.
In general, it seems that the whole situation with the Omicron is fully conducted by the interested parties, both in the political aspect and in the financial markets. The topic is so overblown that fearful investors immediately panic when the word "Omicron" appears in the headlines and begin to get rid of assets, which pushes the demand for protective instruments to increase. And all this continues day after day. It is not yet clear when will this end, but, as epidemiologists believe, perhaps in six months or at least a year. But one thing is clear – such forecasts can encourage steady and logical investors to buy shares of companies with growth prospects in the post-pandemic period right now, despite the upcoming changes in the monetary policies of the world's largest central banks led by the Fed.
Forecast for the day:
This week, the EUR/USD pair is likely to trade in the range of 1.1230-1.1365, nervously reacting to the demand for risky assets. If the Christmas rally starts today, the pair could get support and head towards the upper border of the 1.1365 range.
The USD/JPY pair may increase to the level of 114.50 amid a reduction in tension around the Omicron coronavirus strain.