Overnight Thursday into Friday trading sell-off was ignited by fears of the Omicron Covid-19 variant discovered by a South African medical practitioner. It is believed that the variant has also been detected in Hong Kong, Germany, Canada, Britain, and Australia with more investigations still being carried out in other countries. Though initial investigations by South African Health experts suggest that the variant’s effect are “mild” with no hospitalization cases recorded, the World Health Organization (WHO) has called for caution as more data is unveiled.
Limited liquidity due to US Markets closure for the Thanks-Giving Holiday (Thursday 25th Nov) and Black Friday (Fri 26th Nov) exacerbated global markets sell-off. Amongst the most affected assets and currencies, the South African Rand reached a one-year low trading above R16.35 to the USD, the Loonie (Canadian Dollar) reached a 2-month high at C$1.28 to the USD with the Euro dropping to $1.1290 against the greenback.
As the USD, a Safe haven currency, continues to power on in the midst of volatility still being high (Vix trading above 25 at the time of print) there is the possibility of the greenback strengthening further against its peers. Other Safe Haven assets and currencies to benefit from the sell-off include Gold (XAUUSD) which traded to a high of $1816 on Friday, the Japanese Yen (USDJYP) surged to as much as 113.00 during the Friday sell-off. During risk-off sentiments as experienced on Friday, safe haven asset tend to rally.
However, as concerns of the variant are being muted due to it’s “mild” effects, global governments await more data before extended Covid-19 reaction plans. South Africa and other Sub Sharan African countries have suffered the most from snap travel restrictions on flights outbound from the region. Though Monday is in recovery across financial markets, caution is key as the world awaits more data. Volatility is still high, and more data is still expected on the Omicron variant.
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