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So far, the situation looks rather inconclusive, as the Omicron variant seems to be more contagious than the Delta one, while the course of the disease may be milder. Unfortunately, it may take a while until we get a grip on these dimensions. However, from what we know today, we struggle to see it as a game changer. The medical response is already underway (see number of the week), and newly approved drug treatments will likely help as well. That said, the job of economists and strategists is to estimate the fallout on the economy and markets. In terms of growth, we accept that preventive measures taken by authorities may shave off around 0.2 percentage points of growth this winter. Yet based on what we expect today, most of this should be made up for in the subsequent months.

Correction pattern
In the meantime, the main questions are whether risk assets can rebound and what the quality of the rebound will be like. A sizeable countermove during the coming trading sessions would indicate that the sell-off on Friday was mainly a glitch, due to low volumes during a holiday weekend. Absent a rebound, the correction pattern may be more tedious and require some more nerves on the part of investors. In any case, we advocate not getting carried away by headlines and staying the course.

Conclusion for investors
At the same time, we have performed a few tweaks in our forecasts and ratings. Within currencies, we have downgraded our EUR/USD target.

Number of the week

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