News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
GBP Forecast: Omicron Adds Uncertainty to BoE Rate Rise

GBP Forecast: Omicron Adds Uncertainty to BoE Rate Rise

Justin McQueen, Strategist

GBP/USDFUNDAMENTAL HIGHLIGHTS:

  • GBP SLIPS FOR SECOND CONSECUTIVE WEEK
  • BOE RATE RISE IN DOUBT

A second consecutive weekly drop for the Pound, in which Cable posted a fresh 2021 low following a brief break below the 1.32 handle. Support from Chair Powell regarding a faster QE taper among the main catalysts behind the fresh downside in GBP, coupled with continued concerns over the Omicron variant.

GBP SLIPS FOR SECOND CONSECUTIVE WEEK

GBP Forecast: Omicron Adds Uncertainty to BoE Rate Rise

Source: Refinitiv

BOE RATE RISE IN DOUBT

On the UK front, doubts over a December BoE rate rise has increased after cautious comments from BoE’s Saunders, who is typically seen as the most hawkish member of the MPC. The rate setter noted that there may be an advantage in waiting for more information on the Omicron variant before deciding to adjust policy settings. Additionally, Saunders stated that he sees a limited increase in the Bank Rate, which is in stark contrast to OIS markets pricing in near 1% interest rates by the end of 2022. In turn, the probability for a December rate hike fell from 50% to 30%, with scientific data on omicron seemingly another condition for a rate rise.

Looking ahead to next week, headlines regarding the vaccine’s effectiveness against the Omicron variant will be among the main focal points. However, given that this will be headline-driven, there is little edge to be had. Elsewhere, BoE’s Broadbent is due to speak on Monday, and given the cautious comments by Saunders, the focus will be on his views over the Omicron variant.

GBP TECHS

In terms of levels to watch, below the psychological 1.32 handle, eyes are on the 200WMA, which also coincides with the post-Covid crash fib retracement at 1.3150-55. This would be the area to look for GBP to base out.

GBPUSD Chart: Weekly Time Frame

GBP Forecast: Omicron Adds Uncertainty to BoE Rate Rise

Source: Refinitiv, DailyFX

EUR/GBP: For those looking to fade GBP weakness, a more appropriate avenue would be via EUR/GBP. I would be looking for pullbacks on rallies into the 200DMA (0.8561).

GBP Forecast: Omicron Adds Uncertainty to BoE Rate Rise

Source: Refinitv

The Need to Know Complete Guide on Trading the Pound (GBP)

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES