The British pound has edged upwards and punched above the 1.33 line. In North American trade, GBP/USD is currently trading at 1.3319, up 0.34% on the day.
It has been a light calendar for tier-1 events out of the UK. Truth be told, the markets would be showing scant attention to anything other than a BoE policy meeting, given recent developments which have shaken up the financial markets. I am referring to two key events – the spread of the Omicron variant of Covid and the hawkish pivot by Fed Chair Jerome Powell. Investors have been so caught up with these events that the upcoming US payrolls, normally a hotly-anticipated release, has fallen completely off the radar screen.
Omicron has the potential to cause economic havoc and trigger a global wave of Covid, which understandably has led to deep worry on the part of investors. The good news is that preliminary reports indicate that although the variant may spread quickly, most of those infected have not been showing severe symptoms. We will have to wait a week or two until more information is available about Omicron, and the uncertainty in the meantime can be expected to result in market volatility.
Will BoE hike or balk?
The BoE has been the focus of intense speculation with regard to a rate hike. The bank holds its next policy meeting on Dec. 16 and the pound took a spill after the stunning non-move at the November meeting. The BoE had widely signalled a rate hike was coming, but in the end, the MPC voted by a wide margin to stay on the sidelines. Inflation is running high, but this is more a result of supply bottlenecks than a red-hot economy. Some MPC members have voiced concerns that a rate hike would hurt the recovery, and right now it looks like a 50/50 toss-up as to whether the BoE will press the rate trigger later this month or wait until next year.
GBP/USD Technical Analysis
- GBP/USD has support at 1.3256 and 1.3177
- There is resistance at 1.3435 and 1.3535