Risk appetite returned after the new chancellor of Germany took office. Meanwhile, ECB members expressed different views at their policy meeting yesterday.

During his speech, member of the Board of Governors Martins Kazaks said the ECB should prepare additional measures to support the economy because the new coronavirus strain called omicron could cause significant damage to growth. After all, the central bank's bond purchase program, which is currently worth € 1.85 trillion, is due to end in March next year. But not everyone agreed with this, especially after news emerged that the omicron is not as dangerous as previously thought.

Preliminary data indicated that the strain only slightly reduces the amount of antibodies produced by Pfizer and BioNTech vaccines, so those could still counteract the virus. And even though omicron is more infectious than the first two strains, its symptoms are milder and not severe. Pfizer also said that 3 doses of their vaccine will completely neutralize the infectious effects of the new strain.

But Kazaks said it is too early to be certain on how the new strain will affect the recovery of the eurozone. "At the current moment, we don't know how the omicron variant will develop," he commented. "Unless it spills over into significant and large negative revisions to the outlook for growth, I don't see that March - which the market has been expecting for some time and which we've been communicating in the past - should be changed . "

The ECB will have another meeting on December 16, during which the members will decide whether they will introduce new measures to stimulate the economy. Most likely, they will consider the situation around COVID-19, as well as the dynamics of consumer prices, which, in November, rose by 4.9%. That is more than double the central bank's target of 2% and is a serious risk to the economy.

ECB Vice President Luis de Guindos warned that the rise in prices may continue longer than originally planned, but by the end of 2022 it will slow down and then return to its target value. As such, he does not expect the ECB's plans to be postponed, despite the uncertainty caused by the omicron.

Olli Rehn, another member of the Governing Council, said the European Central Bank may need more time to determine its next moves as the coronavirus and new pandemic restrictions are affecting the eurozone recovery. He emphasized the importance of clarifying the options of authorities, but noted that it is now quite difficult to make decisive actions. He said they may be able to decide next week whether to end the PEPP program on March, or to reconsider their plans. Rehn explained that he is not a supporter of the old bond purchase program and expects it to be changed. "If it looks like the situation is getting worse again, PEPP is flexible and can be used effectively to grease the monetary policy transmission mechanism," he said.

On a different note, Social Democrat Olaf Scholz officially took over as chancellor in Germany, ending the 16-year conservative rule of Angela Merkel. Scholz, who served as vice-chancellor and finance minister of Merkel for the past four years, won a 395 majority vote in the lower house of parliament. During his inauguration, Scholz vowed, among other things, to devote his energies to the well-being of the German people. However, the new Chancellor faces a rather difficult task - the fight against the fourth wave of coronavirus infection.

Just yesterday, Germany reported a 2,415 increase in coronavirus cases, reaching a total of 69,601. Deaths also rose to 527, the highest number since February. But the seven-day incidence rate has declined, which means that the country is already out of the peak of the outbreak.

That is the reason why bulls are aiming at 1.1350 in EUR/USD. A consolidation above this level will lead to further jumps to 1.1385, 1.1440 and 1.1520, but if the pressure on euro returns, the pair will drop to 1.1320, and then to 1.1270.

In terms of GBP/USD, bulls managed to push the quote away from the monthly lows so now a lot depends on 1.3245 because a breakdown could lead to an increase to 1.3285, 1.3330 and 1.3370. But if pressure returns on pound, the pair will decline to the base of the 32nd figure and then drop lower to 1.3155 and 1.3110.