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Dec 08 - 11:55 AM

GBP/USD - COMMENT-Sterling Hits New 2021 Low As UK Lockdown Talk Adds To Rates Weight

By Paul Spirgel  —  Dec 08 - 10:14 AM

GBP/USD is preparing to end the year with a whimper, slipping to a new 2021 low at 1.3162 on Wednesday, with potential COVID-related restrictions providing the latest setback for sterling, which remains undermined by doubts over UK rate hikes since the BoE unexpectedly held steady on Nov.

Further divergence in U.S.-UK rate expectations after Dec.
15-16 Fed and BoE policy
meetings would push GBP/USD lower toward early October 2020 lows by 1.28.

Media reports of an imminent lockdown nL1N2ST0U1 to arrest the spread of the Omicron variant nL8N2ST2N8 kept market speculation of a rate hike at the Dec. 16 MPC meeting grinding lower BOEWATCH, weighing on GBP/USD.

Traders should now be eying support the 200-week moving averageat 1.3152 and the lower 30-day Bolli by 1.3132.

Diminishing rate-hike expectations have reversed sterling's fortunes after its upbeat start to 2021 on waning Brexit tensions and the successful UK COVID vaccine rollout.

Since the Nov.
BoE meeting
, the pound has been weak even against low-for-longer currencies such as the JPY and EUR.
Sterling is now down 2.46% versus the yen and 0.45% versus the EUR over the past six months.
The euro and yen
have fallen more than 7% versus the dollar over the same period.

For more click on FXBUZ

GBP Chart: Click here

Refinitiv IFR Research/Market Commentary


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