Forex Today: Volatile Markets May Regain Composure

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on December 22, 2020

New coronavirus strain rattling markets due to unknown impact on vaccine.

  • Financial markets made an unusually sharp risk-off move yesterday as the week opened before recovering, on fears concerning a new strain of coronavirus which has emerged in the U.K. with the British pound especially hit hard. However, risky assets later regained most of their losses as the U.S. Congress moved towards passing a second stimulus bill.

  • Most major currencies are in strong, long-term bullish trends against the U.S. dollar, and close to multi-year high prices. However, the dollar has opened strongly this week, and has gained ground over recent hours again. The British pound looks to be the most vulnerable major currency today.
  • Negotiations between the U.K. and the E.U. on a final Brexit trade deal are ongoing. Language from the U.K. government in recent hours has been somewhat desperate with a new offer on fishing. If a deal is to be agreed, it must be done within the next 9 days. The threat of “no deal” has made the pound very vulnerable.
  • A new strain of coronavirus has emerged in the U.K. and is reported to be up to 70% more infectious than the generic coronavirus, while there is some fear it may be resistant to the vaccines. This has led the British government to impose further restrictions on populous south-eastern England, and over 40 countries (notably France, Germany, and the Netherlands) have begun to bar entry to flights and travelers from the U.K. and some also from Denmark. Additionally, a new strain has emerged in South Africa which seems to produce more serious illness in younger people.
  • Global coronavirus deaths have increased dramatically since early October to reach a level approximately 90% higher than the peak last April. Coronavirus new cases seem to be rising again in the European Union, but new cases and deaths are beginning to plateau in the U.S.A. The U.S.A. is currently confirming more than 200,000 new cases daily and is now seeing more than 1,800 deaths per day.
  • Total confirmed new coronavirus cases worldwide stand at over 77.3 million with an average case fatality rate of 2.20%.
  • The rate of new coronavirus infections appears to now be increasing most quickly in Argentina, Belarus, Bolivia, Brazil, Burkina Faso, Chile, Colombia, Cuba, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Estonia, France, Indonesia, Ireland, Israel, Japan, South Korea, Latvia, Lebanon, Lithuania, Mexico, Netherlands, Niger, Nigeria, Norway, Panama, Paraguay, Peru, Poland, Russia, Senegal, Slovakia, South Africa, Tunisia, Uruguay, U.K., the U.A.E., and the U.S.A..

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