Forex Today: Risk-on mood at full steam amid easing Omicron fears, China stimulus

Here is what you need to know on Tuesday, December 7:

The risk tone remains firmer heading into the European open, reflective of the gains in the S&P 500 futures. The Asian stocks rebounded on China’s pledge to provide support measures to ramp up economic growth. Meanwhile, China’s troubled property sector stocks jumped after the Communist Party’s Politburo hinted at easing in curbs on the real estate industry.

After Monday’s Reserve Requirement Ratio (RRR) cut by the PBOC, the country’s central bank announced a cut on its relending facility rates by 25 basis points (bps) to support the rural sector and small firms, effective from Dec. 7, Securities Times reported on Tuesday.

The market optimism was further bolstered by the ebbing fears over the new Omicron covid variant, with scientists citing mild effects. South Africa is seeing no acceleration in new infections.

Policymakers worldwide are also downplaying the impact of the new variant on the economic recovery. The Reserve Bank of Australia (RBA) kept the key rate unchanged at a record low of 0.1% at its December meeting, although maintained a patient stance on the policy.

Across the G10 currencies space, AUD/USD extended the bounce towards 0.7100 on the expected RBA rate decision. China’s surge in imports also aided the upside in the aussie.

Meanwhile, EUR/USD keeps its recovery mode capped below 1.1300 amid firmer yields, as investors await the German Industrial data, ZEW Survey and Eurozone GDP revision for a fresh trading impetus. GBP/USD is consolidating the gains below 1.3300, underpinned by the upbeat mood.   

USD/JPY is accelerating alongside the yields, looking to recapture 114.00. USD/CAD is weighed down by the retreat in the US dollar while the extended rally in WTI also exerts downside pressure on the pair.

Gold is heading back towards the four-week troughs of $1,761 amid an improved mood.

Bitcoin is looking to extend its recovery momentum beyond the $51,000 mark, as the crypto market finds its feet.