Sterling was able to gain some subtle upside to close the week on Friday, but still remains under pressure from Omicron fears and political problems. The Pound had already struggled last week due to the Prime Minister’s “intentions to enact new restrictions in the face of rising COVID-19 cases in Britain”. Adding to this, “Boris Johnson is in trouble for allegations of a Christmas Party held in the PM's premises in December last year… while the entire country was in lockdown”. There have been calls by numerous pollical figures for Johnson to step down in light of the recent allegations, and “uncertainty about the PM’s political future” is proving a hinderance to the Pound’s performance. Looking ahead to this week, the market’s focus is on the Bank of England’s Interest Rate decision on Thursday. The consensus amongst economists now is that fears of Omicron’s impact on the UK economy “are likely to convince the BoE to leave rates unchanged once again”.
GBPUSD opened on Friday at 1.3199 and was able to surpass the 1.32 mark. Cable closed the week at 1.3263.
GBPEUR was also able to advance on Friday – opening at 1.1696 and closing at 1.1723.
EURUSD traded in a tight range on Friday. The pair opened at 1.1285 and closed at 1.1313.
It is likely the Dollar could experience heightened volatility this week as the “world’s most powerful central bank is set to tighten its policy”. Speaking before a Senate panel at the end of November, Federal Reserve Chair Jerome Powell “tipped the warning that the central bank would discuss speeding the taper of its $120 billion monthly bond purchases at the December meetings”. His comments were also supported by a number of other Fed speakers, “who all suggested the central bank could end the program sooner than the current timeline of June 2022”.
