- US Federal Reserve spokesman Christopher Waller said rates could be raised as early as March.
- UK Brexit Secretary Lord David Frost said there has been little progress on the Northern Ireland Protocol.
- Decline in stock indices.
By the end of the week, major currencies closed down. Canadian dollar (-1.31%), New Zealand dollar (-0.90%), euro (-0.71%), Australian dollar (-0.64%), Swiss franc (-0.38%), Japanese yen (-0.33%), British pound (-0.25%).
On Friday, December 17, trading in the euro ended in decline. The euro fell 0.82% to 1.1237. The rally of the dollar was caused by the representative of the US Federal Reserve Christopher Waller. He said that rates could be raised as early as March, after the decision to stop buying bonds earlier than planned.
Waller's hawkish comments negatively affected the American indices. Some of the volatility in the markets can be attributed to the "quadruple witch hour", or the simultaneous expiration of options, futures on individual stocks and stock indices, and the rebalancing of funds at the end of the quarter.
The Day of the Four Witches occurs every 3 months - four times a year. Volatility tends to increase on such days. Prices can fly in any direction.
The British Brexit Minister Lord David Frost added a negative boost to major currencies. In an interview with the FT, he said on Friday that he has not made enough progress on the Northern Ireland Protocol. Frost added that cumbersome customs procedures and the way EU rules are applied should be radically changed. Brexit supervisor David Frost has resigned.
Scheduled statistics (GMT +3):
- At 12:00 the Eurozone will publish the balance of payments for October.
- At 14:00 in the UK, there are data on industrial orders from the CBI for December.
- At 18:00 the US will present the leading indicators index from CB November.
Current situation:
Trading in Asia opened with an increase in the dollar index and a decline in oil prices. Major currencies are showing mixed performance. Risky assets are trading in the red. The reason may be related to growing concerns about the proliferation of the Omicron variant.
London Mayor Sadiq Khan has declared a state of emergency in the city due to a sharp increase in the number of cases of infection with the omicron strain of coronavirus. He did not announce new restrictions to combat the virus. As of December 17, Britain has an absolute record for the number of COVID-19 cases per day - 92,907 people.
Holland has imposed a strict quarantine over Omicron from December 19 to January 14, 2022. Only shops selling essential goods remain open. Negative markets were finished off by the news of the death of a New Zealand resident who was vaccinated by Pfizer.
The economic calendar is tight this week, plus a short week due to Catholic Christmas in Europe and the US. Trading volumes will decline towards the end of the year and will recover after January 3, 2022. The less liquidity, the higher the market volatility.
Technical analysis:
Since the beginning of December, the price has remained in the range of November 30. Against the backdrop of negative news, sellers expanded it from 1.1235-1.1383 to 1.1222-1.1383. Lockdowns and expectations of the US FRS rate hike in March will put pressure on the euro. If the 1.1200 level holds until Wednesday, buyers will have the opportunity to return to 1.1350 by closing short positions. Since the euro closed with growth on Friday, today we can consider a movement against Friday to the balance line of 1.1290 (SMA55).
Summary: the euro closed lower on Friday amid declining risk appetite. Market sentiment changed after statements from the US Federal Reserve spokesman Christopher Waller that the rate could be raised in March 2022. On Monday, December 20, interest in risky assets remains low due to the worsening epidemiological situation with the coronavirus. Europe introduces lockdowns, investors fear market collapse.