The Federal Reserve announced it will accelerate the wind down of its QE programme, while FOMC members now expect a total of eight rate increases in the next three years, with three of these coming in 2022. Somewhat surprisingly, the dollar sold off after the event, while risk assets rallied.

Most major currencies traded within relatively narrow ranges on Monday, with investors awaiting a number of high-profile central bank announcements later in the week.

This week is shaping up to be a particularly important one for the FX market, with all of the G3 central banks set to announce their latest policy decisions.

We have tempered our expectations for Bank of England interest rate hikes in the past few weeks, and now see it as unlikely that we’ll get the first pandemic era UK rate increase at this week’s MPC meeting.

This week’s meeting is set to be one of the most important this year for the ECB, with the bank widely expected to shift towards normalising policy as the Eurozone economy recovers from the pandemic downturn and inflation reaches multi-decade highs.

The detection of the highly mutated strain of COVID-19, omicron, has heightened uncertainty among investors heading into this week’s Federal Reserve meeting.

Sterling briefly fell to its weakest position so far this year versus the US dollar on Wednesday, after Boris Johnson’s government announced new restrictions to tackle the latest wave of COVID-19 infections.

The major currencies were largely rangebound on Monday, although we have seen a bit of a sell-off in the safe-havens, as all signs so far suggest that the new omicron variant of COVID-19 only leads to mild symptoms.