Sterling is down on Monday as “a broad risk-off mood swept though financial markets” in the early hours due to the investor’s fears over the spread of the Omicron COVID-19 variant. Sterling has almost erased all the gains it had made last week after the Bank of England unexpectedly raised interest rates and could depreciate further if the UK Omicron situation worsens. Since the rise in cases in the UK, investors have become increasingly worried of new UK lockdown, with some politicians such as Sadiq Khan claiming it is “inevitable”. Speaking on Sunday, Health Secretary Sajid Javid warned that if the government “don’t bring in new restrictions sooner rather than later” the UK will suffer a spike of “positive cases and potentially public services like the NHS on the verge of collapse, if not collapsing”.
After spiking on Thursday following the BoE rate hike, GBPUSD dropped on Friday, falling back into the 1.32 range. Cable started the session at 1.3322 but was unable to maintain that position and closed the week at 1.3267.
GBPEUR in contrast was able to make subtle gains on Friday despite trading in a tight range. The pair opened at 1.1755 and closed at 1.1765.
EURUSD had a hard session on Friday, closing the week below the 1.13 handle. The pair opened at 1.1333 and closed at 1.1276.
The Dollar is up on Monday, close to “its highest point in 17 months against major peers” after the Federal Reserve last week “signalled a first pandemic-era interest rate increase could come as early as March”. Since then, Fed Governor Chris Waller claimed on Friday that he thought a rate increase early next year would be “very likely” and Mary Daly, President of the San Francisco Fed, “refused to rule out a March increase and voiced support for as many as three increases next year”.