The dollar ticked higher amid a broadly calmer tone in markets. This is because the fears over Omicron’s impact eased. But the currency moves were muted ahead of a key U.S. payrolls report. The path to earlier Federal Reserve interest rate hikes can be cleared by this. Scientists in South Africa, said that existing vaccines should still protect against severe disease and death. This is where the Omicron was first discovered. The three Omicron cases identified in the U.S. also all displayed mild symptoms.
Fed officials joined Chair Jerome Powell in striking hawkish stances. San Francisco Fed President Mary Daly said that it may be time to start crafting a plan to raise rates to combat inflation. Richmond Fed President Thomas Barkin throws his support for normalizing policy. Tapas Strickland, a director for economics at National Australia Bank, wrote in a client note, that Fed talk overnight was undeniably hawkish. Omicron headlines were net positive overnight.
This helps risk sentiment to recover. The dollar index, edged higher for a third day. The dollar is little changed, despite a steep drop. The index had plunged 0.70%. Powell reiterated in testimony to Congress that he and fellow policymakers will consider swifter action at their upcoming meeting. Economists estimate that the United States created 550,000 new jobs. Money market see high odds that the Fed will raise the target rate by a quarter point. The dollar slipped 0.09% to 113.10 yen. The euro was little changed at $1.13025. Australian dollar eased 0.12% to $0.7084.
The European Central Bank and Reserve Bank of Australia have stuck to dovish stances, pushing back against market bets that policymakers will be forced to bow to inflationary pressures. Commonwealth Bank of Australia strategist Joseph Capurso wrote in a report that, they continue to expect near‑term AUD moves will be driven by Omicron. The risk remains a dip below $0.7000. Capurso said that the U.S. labour market takes centre stage and should keep currency markets quiet.