The US dollar fell to two-week lows against its major rivals yesterday after concerns over the US economy’s resilience sapped USD demand.
Warnings from health secretary Sajid Javid of ‘community transmission’ of the Omicron Covid variant ‘across multiple regions of England’ saw Sterling subsequently pare these gains.
However, the pound then came under more sustained pressure, with the GBP/USD exchange rate even striking a new 2021 low, after the UK government announced it would be implementing its ‘Plan B’ Covid restrictions in order to combat the spread of Omicron.
The new measures expanded the mask mandate as well as reintroduced working from home guidance. These weighed on Sterling sentiment as they were seen as likely to hinder the UK’s economic recovery as well as making it highly unlikely the BoE will be willing to hike interest rates this month.
A market correction helped the pound claw back a good portion of these losses in the latter half of the week, although this recovery was capped by the release of the UK’s latest GDP figures, after they revealed domestic growth almost stalled in October.
Turning to this week, the primary focus for GBP investors will undoubtedly be the BoE’s final interest rate decision of the year.
With the BoE no longer expected to adjust its monetary policy this month the focus will instead turn to the bank’s forward guidance.
While Omicron concerns could see the BoE adopt a more cautious outlook, the publication of strong employment and inflation figures earlier in the week could see the bank signal a rate hike might be possible in early 2022, bolstering the pound.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)