Pound drifting on quiet calendar

The British pound is unchanged in the North American session. Earlier, GBP/USD dropped to 1.3161, setting a new low for the pound in 2021, as the currency’s woes continue.

There are no UK events on the calendar, which has meant a very quiet day for sterling. That could change on Friday, with the UK treating the markets to a data dump. The highlights are the monthly GDP report and Manufacturing Production. With no UK releases for the market to digest today, attention has focused on two hot issues – Omicron and the Bank of England policy decision.

Omicron and BoE in focus

Omicron has caused shaken up the financial markets and triggered sharp volatility. There was panic when Omicron began spreading outside of South Africa last month, with fears of a new global Covid wave that threatened to derail the weak global recovery. Risk appetite plunged but quickly rebounded on reports that Omicron was less severe than Delta.

This optimism has given way to caution once more. The World Health Organization is saying that it will need 2-3 weeks to have a more thorough understanding of Omicron. It is also unclear at this stage how effective the Pfizer and Moderna vaccines are against Omicron, although preliminary reports have been positive, which has helped risk appetite rebound this week. Omicron’s symptoms may be less of a threat than Delta, but it is much more contagious, which has led countries to impose new health restrictions. The UK government has put into effect ‘plan B’, which includes the mandatory wearing of face masks in public indoor areas. If Omicron continues to spread, the government is likely to impose further restrictions, which could hamper economic activity.

The BoE rate decision next week is also in the spotlight, especially because it is a live meeting. Just over a week ago, the odds of a rate hike were 50/50, but with the Omicron crisis, it seems likely that the bank will balk and maintain rates at the ultra-low level of 0.10%. Earlier this week, the RBA and Bank of Canada maintained policy, citing the uncertainties surrounding Omicron. There’s a strong chance that the BoE will follow suit, and kick the rate ball down the road.

.

GBP/USD Technical Analysis

• GBP/USD has support at 1.3161 and 1.3091
• There is resistance at 1.3336 and 1.3441

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.