• The Omicron covid variant has been rattling markets and is set to dominate for a few more days.
  • Suspected vaccine resistance is one critical type of headline that could move markets.
  • Omicron's lethality is another key factor that could move investors in two ways.

"When you have to shoot, shoot, don't talk" – that famous line from "The Good, the Bad and the Ugly" resonated with what some governments did in response to the discovery of Omicron, a new and potentially dangerous COVID-19 variant. Markets also "shot first" by selling, then sat down to think.

The evolution of a contagious, deadly, and vaccine-resistant coronavirus strain was always a possibility, and fears that it is happening now scare markets. However, it is mostly the uncertainty that caused the panic. Thin holiday liquidity also exacerbated the moves. 

What has happened until now? 

Health experts in South Africa were alarmed by the rapid spread of covid in some areas, ran genetic sequencing and found a new variant with more mutations than usual. The existence of many genetic changes in the area of the virus that vaccines attack, raised the alarm.

The World Health Organization followed by designating the strain as a "variant of concern" and named it Omicron, the 15th letter in the Greek Alphabet. Since then, several countries have slapped on travel restrictions and some began reporting cases of the variant. 

Markets tumbled on Black Friday, a day in which Americans are digesting their Thanksgiving meals and busy shopping and market liquidity is low. The safe-haven dollar advanced, but mostly against commodity currencies. The pound also suffered.

The lack of funds exacerbated the falls. Demand for safe bonds was so strong as to send yields tumbling down, weakening the greenback against the safe-haven yen and franc – and also vs the euro, which became a funding currency once again. 

When traders returned on Monday, however, the mood improved due to countertrend, bargain-seeking and several seemingly positive developments

What is known about Omicron?

The one certain development is that this strain is highly contagious. That is what set the alarm in South Africa and rapid spreading is feared elsewhere. However, it can also be a positive development, if some encouraging news materializes.

Watch out for 1: Lethality

So far, health officials in South Africa and its neighboring countries have reported that people infected with Omicron only have mild symptoms. They warned that these are early days and that most of those with the variant are relatively young and healthy. 

If headlines continue suggesting that Omicron is mild, it is good news in two ways. Apart from being less deadly and causing fewer restrictions, the highly contagious Omicron could also crowd out Delta, further improving the situation.

Conversely, if Omicron is as deadly as Delta or worse, it is undoubtedly depressing news. 

Watch out for 2: Vaccine resistance

Scientists suspect that Omicron could evade existing immunization schemes due to the composition ond amount of its mutations. Vaccine makers such as Moderna and Pfizer said it would take them roughly 100 days to get modified vaccines to the masses – a lifetime for markets.

If dealing with Omicron requires new vaccines, it will imply a substantial economic slowdown, as people will be required to hunker down – with or without restrictions.

However, if headlines suggest that existing jabs are at least somewhat efficient in dealing with Omicron, it is good news. Booster shots and minor restrictions could suffice.

Market reactions

Low lethality and the holding up of vaccines could send stocks higher and bond yields lower. In turn, commodity currencies would rise while majors could return to shaking according to their own issues. 

If Omicron is deadly and beats vaccines, however, shares could plunge and investors rush to bonds – sending yields lower. Yet the dollar would eventually rise against all currencies, even if bond yields collapse.



Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content

Recommended Content

Editors’ Picks

EUR/USD remains pressured near 1.0250 amid renewed USD strength

EUR/USD remains pressured near 1.0250 amid renewed USD strength

EUR/USD remains pressured near 1.0250, undermined by a broad rebound in the US dollar after dismal Chinese data soured sentiment. Growing recession fears in the Eurozone amid the deepening energy crisis weigh down on the euro. 


GBP/USD drops towards 1.2100 as US dollar firms up

GBP/USD drops towards 1.2100 as US dollar firms up

GBP/USD is dropping towards 1.2100, as the US dollar rebounds amid a negative shift in risk sentiment amid weak China data. BOE’s Bailey shows readiness for a ‘review’ on UK PM Candidate Truss’ criticism. Critical UK data and Fed minutes are in focus this week. 


Gold closes the week above 50 DMA, what’s next? Premium

Gold closes the week above 50 DMA, what’s next?

Gold price is reversing Friday’s rebound above $1,800, as bears return at the start of the week. Buyers appear to lack follow-through upside momentum, as souring risk sentiment revives the US dollar’s safe-haven appeal.

Gold News

Tezos to provide bulls a generous exit before a 15% nosedive

Tezos to provide bulls a generous exit before a 15% nosedive

Tezos Price is hovering above a stable support level after facing an intense rejection. While this foothold is likely to provide harbor, it will not be for long. Investors must prepare for a long squeeze as bears make an elaborate move.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!