Omicron concerns will likely keep the Bank of England on hold on Dec 16, which should trigger the next move lower in sterling, despite a stronger economy and rising inflation.
UK jobs data on Tuesday showed rising employment and falling unemployment, despite the end of the government's furlough programme nL8N2SZ18Q.
Wednesday's inflation data is expected to be strong: a Reuters poll predicts a 4.7% year-on-year rise in headline CPI versus 4.2% in October.
A UK manufacturing survey on Monday nL8N2SV4QP and a Citi/YouGov survey Tuesday nL9N2RR01G fuelled inflation fears.
This scenario would normally be a trigger for the BoE to raise rates, but BOEWATCH currently prices no change on Thursday at nearly 72%.
Markets believe surging COVID-19 cases and the expected "tidal wave" of infections from the Omicron variant in the UK nL8N2SZ5EA will force the BoE to take a cautious stance.
The UK needs a unified, coherent government to lead it out of the pandemic and post-Brexit world. Prime Minister Boris Johnson's government is in chaos after the opposition saved his COVID-19 policy nL1N2SZ0L5, which may be another factor encouraging the BoE to maintain stability.
Technically 5, 10 and 21-day moving averages, plus 21-day Bollinger bands head lower, which is a bearish trending setup.
Look for a GBP/USD break of 1.3166, 38.2% of the 2020-2021 rise.
A close above the 1.3308 falling 21 DMA is needed to end the downtrend.
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