GBPUSD at Yearly Low as UK Tightens Restrictions
Despite early Omicron data suggesting that the latest Covid-19 variant may not be as bad as initially feared, yesterday, UK Prime Minister Boris Johnson announced the return of certain restrictions in England to help curb its spread.
The announcement came as the new variant drives a rise in infections across the UK, which topped 51,000 new reported cases on Wednesday.
The new restrictions in England include work from home guidance, mandatory mask wearing in most public places and Covid Pass requirements for various events. Elsewhere in the UK - Scotland, Wales and Northern Ireland had already brought in similar restrictions.
After the restrictions were confirmed, the GBPUSD continued the downward trajectory it has been following since late October, reaching its lowest point since December 2020 in the process.
Adding to the pressure on the GBP is the growing expectation among economists that the Bank of England (BoE) will not be raising interest rates imminently, with many now predicting a rise in February.
Instead, the BoE is expected to adopt a “wait and see” approach, until the effect of Omicron on the UK economy becomes more apparent. Although, as we have seen recently, the situation can change quickly, and it may be the case that new information from scientists could once again change expectations in the coming days.
In the meantime, for the short-term at least, the bears look like they may remain in control here. However, it will be important to keep an eye out for the impact of the latest inflation data from the US on Friday, as well as the all-important BoE interest rate decision on 16 December.
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