By Alun John

HONG KONG, (Reuters) – The dollar was calm at the beginning of a week when central bank meetings including the Federal Reserve will drive currency markets. Sterling fell after Boris Johnson warned of the potential impact of the COVID-19 version.

The greenback was compared to six major peers in the basket at 96.091. That’s a drop from the mid-November high of 96.938 before word of the new coronavirus variant omicron reached widespread attention.

Monday’s euro gained $1.1316, while the Japanese yen dropped a bit to 113.51 per USD.

Following Sunday’s statement by Johnson (British Prime Minister) that Britain was facing an “omicron-related coronavirus tsunami”, the Pound fell 0.1% and peaked at $1.3257. Johnson also stated that Britain will need two more vaccine doses to combat it.

The new strain has caused markets to swing widely. Markets have moved in a wide range since then, driven initially by flows to safer-haven assets. The flow of money reversed after it was reported that it might not be as severe as people had feared.

Analysts say that clarity is all they want for Christmas. Barclays Research note headlined “LON:”

The Omicron variant news is not the only breaking news. This week’s most important scheduled events in currency markets are the central bank policy meetings. Six of the G10 central banking institutions and several emerging-market central banks will meet.

According to Barclays Analysts, “Central banks must strike a difficult equilibrium between Omicron-induced uncertainty levels and higher inflation levels.”

Most important of all is the Federal Reserve’s two-day meeting, which ends on Wednesday.

Investors expect that the Fed will announce an acceleration in its bond-buying programme. This could open the way to at least one rate increase next year.

According to FedWatch, the CME Group’s FedWatch program (NASDAQ:), traders now have a greater than 50% chance that there will be a rate increase by May 2022.

The dollar would be supported by an acceleration in tapering, particularly against currencies whose central bank will probably tighten their belts slower.

“The Fed meeting may be the catalyst to bring down 1.10,” Investors may be more comfortable waiting to hear from the ECB on the day following the Fed meeting before chasing this move. could also be pressing 115 Post Fed,” wrote ING analysts in a memo.

This week, both the European Central Bank (ECB) and Bank of Japan (BoJ) will be reviewing their policies. The market participants are beginning to discuss the possibility that the ECB might become more hawkish while the BoJ will likely remain dovish.

The Bank of England as well as the Swiss and Norwegian central banks are hosting meetings.

The world’s biggest cryptocurrency was now trading at just below $50,000. However, it still needs to recover November’s record of $69,000.