The dollar edged lower Wednesday, consolidating after strong gains during the previous session after Fed Chair Jerome Powell indicated the U.S. central bank is likely to speed up the tapering of its asset purchases. Driving the earlier dollar gains were comments from the head of the Federal Reserve, Jerome Powell, to the Senate Banking Committee on Tuesday. "At this point, the economy is very strong and inflationary pressures are higher, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, perhaps a few months sooner," said Powell, while indicating that it was time to "retire" the word transitory when talking about high inflation levels.
Sterling fell versus the euro and the dollar on Tuesday as traders feared the Bank of England might keep interest rates unchanged amid concerns about the Omicron coronavirus variant. Omicron was first detected in southern Africa last week, prompting countries around the world to rush to tighten border controls and sending markets into a tailspin on Friday. The dollar strengthened in the afternoon, after Federal Reserve Chair Jerome Powell said the risk of inflation had increased and suggested retiring the term "transitory" for inflation, while worries about the new Omicron variant kept a bid in safe-haven currencies.
The Euro has bounced a bit during the trading session on Tuesday as we continue to see a recovery in the common currency. At this point, I think the market is probably going to try to see if it can break above the 1.14 level, but at the first signs of trouble, it is likely that we continue the longer-term downtrend.
Sterling fell to a two-week low versus the euro on Tuesday as traders feared the Bank of England may keep interest rates unchanged amid concerns about the Omicron coronavirus variant. Risk assets were under pressure after Moderna Chief Executive Stéphane Bancel told the Financial Times that existing COVID-19 vaccines are unlikely to be as effective against the newly detected variant as they have been previously. The Omicron variant was first recorded in southern Africa last week, prompting countries to rush to tighten border controls and sending markets into a tailspin on Friday.
Sovereign bond yields across the euro area were broadly lower on Tuesday as warnings about the impact of the Omicron coronavirus variant renewed demand for safe-haven assets. Drugmaker Moderna's CEO said COVID-19 vaccines were unlikely to be as effective against Omicron as they have been against the Delta version. In prepared comments to be delivered later on Tuesday to U.S. lawmakers, and released already, Federal Reserve Chair Jerome Powell said the variant posed downside risks to the economy.
Euro zone economic sentiment eased in November in line with expectations, data showed on Monday, as consumers became less upbeat and trimmed their inflation expectations, although manufacturer selling price forecasts hit a record high. The European Commission's economic sentiment indicator eased to 117.5 points in November from 118.6 in October for the 19 countries sharing the euro. For services, which make up the bulk of the euro zone economy, sentiment actually rose to 18.4 from 18.0.
Euro gained against the Great British Pound and the US Dollar today as German ZEW Economic Sentiment and European ZEW Economic Sentiment data were very positive, despite the prolongation of restrictions in Europe until mid-February.