News flow remains mostly positive, the risk-on rally faded a little during the overnight session. US President, Joe Biden, continues to say he can get a deal done on the Build Back Better bill and the US FDA is set to approve two Covid drug treatments from Pfizer and Merck & Company. Countries in the West also continue to quickly roll out booster jabs. Investors are seeing the climbing infection rates, however, and remain nervous. S&P500 futures were trading slightly in the red and most Asian indices are modestly higher. In G10 FX, the USD was the outperformer and continues to remain well supported.
The CAD hasn't benefited much this morning from firmer crude and a stronger attitude among market investors. The CAD is plainly battling to find support, as the spot remains higher near recent highs. The CAD appears to be undervalued in light of the improving risk environment, lower volatility, and higher crude prices. For the time being, the loonie will be guided by headlines from Omicron and general risk sentiment.
EUR/USD again failed to settle back above 1.13 yesterday. The surge in European gas prices to fresh record highs likely took its toll on the single currency, as it further threatens the purchasing power of European consumers in already difficult times, while also acting as a reminder of the ongoing geopolitical tensions with Russia. Apart from that, the news flow was fairly light in the Eurozone. The decline in consumer confidence to a nine-month low of -8.3 did not spook the EUR. Taken together, the current tight trading pattern is likely to continue into the year-end.
The GBP has continued to trade more in sync with the FX commodity bloc, as it recouped some ground against other FX majors yesterday. The recovery in risk appetite helped, while the domestic news flow was not particularly supportive. The UK economy is poised to end the year on a somewhat weaker footing, the final UK GDP prints for Q321 appear too backward-looking to give the GBP any sort of relief this morning.