Omicron: Calm before the Storm.

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On Thursday, currency markets remained stable. As a result, investors were looking for hints about the threat presented by the Omicron coronavirus strain. As well as the rate at which the Federal Reserve may withdraw stimulus in the United States. 

On a risk-off day for markets overall, the dollar scarcely moved versus most competing currencies. Along with anxious equities markets in Europe began lower.

On Wednesday, the first instance of the Omicron variety was discovered in the United States. Markets are being weighed down, despite the fact that nothing is known about the new strain. 

“It looks like that the market is taking a breather. On Thursday morning this breather is what may be the eye of the storm.” Citi FX analysts wrote in a note. 

The dollar index measures the value of the US currency against six major currencies. It remained roughly unchanged on the day at 96.035.

The index fell last week after news of the Omicron variation broke. It is still close to a 16-month high of 96.938 set last month. 

Currency volatility trackers, on the other hand, are still at multi-month highs. They are suggesting that significant changes are still possible. 

Traders are also waiting to see how soon the Federal Reserve will reduce its asset purchases. Central banks around the world wrestle with how swiftly to withdraw stimulus in the face of rising inflation.

In testimony to Congress on Wednesday, Fed Chair Jerome Powell maintained that he and other officials will consider swifter action at their December 14-15 meeting.

Fed Chair Powell said plainly this week that the Fed is becoming more worried about the durability of rising inflation. He highlighted that they are willing to take policy action to address inflationary threats.

These remarks strongly indicate that the Fed will most probably accelerate the pace of QE reduction in December.

The euro remained stable against the US dollar, trading at $1.13205. 

The Japanese yen had risen in value in recent weeks as investors sought safe-havens. However, it has given up some of its recent gains against the US dollar, slipping 0.4 percent to 113.26 yen. 

Sterling recovered by a quarter of a percent, rising above $1.33.

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