GBP USD Exchange Rate: The Week Ahead November 29th

GBP USD Exchange Rate Breaks Above Key 1.37 Resistance Level

The pound briefly dipped below 1.33 on Friday for the first time since December 2020 as a new Covid-19 variant hit sentiment in global markets. The strain – which goes by the name Omicron – is believed to be more transmissible and have higher resistance to vaccines.

The emergence of the new variant in southern Africa sparked alarm amongst investors who scaled back their expectations for a Bank of England (BoE) interest rate rise next month, intensifying downward pressure on the pound.

Interest rate expectations in focus for the pound

The pound will continue to take its cues from UK interest rate expectations this week – and the factors that impact them: notably Covid-19, economic data, and rhetoric from central bank officials.

Investors will monitor the fallout from the Omicron variant after Prime Minister Boris Johnson announced the reintroduction of masks in indoor spaces and specific travel restrictions over the weekend.

Speaking at a Downing Street press conference on Saturday, Mr Johnson said: “We need to slow down the spread of this variant in our country and buy time for our scientists to find out what we’re dealing with.

“We don’t yet exactly know how effective our vaccines will be against Omicron, but we have good reasons for believing they will provide at least some measure of protection.”

BoE Governor Andrew Bailey is scheduled to make a speech on Wednesday. Last week, he told a discussion organised by the Cambridge Union that the difference between providing commentary on the economic outlook and the timing of interest rate action is hard to define: “The boundary between a commentary and guidance is quite murky, actually, when you think about the words we use,”

Non-farm payrolls report in focus for the dollar

The dollar was riding high last week after US Federal Reserve Chair Jerome Powell was renominated to the position, providing a clearer outlook for monetary policy, including the likelihood of rate hikes next year.

Several speeches by Fed officials this week could provide further clues about the direction of US policy, including an address by Mr Powell on Monday.

Investors in the dollar will be hoping for a view on how the central bank plans to tame inflation, which is running at its highest rate in more than three decades.

The highly anticipated non-farm payrolls report for November is published by the US Bureau of Labour Statistics on Friday.

The last report showed 531,000 jobs were added to the US labour market in October – the largest amount since July – reaffirming the Fed’s decision to start tapering its $120bn-a-month asset-purchase programme.

The pound briefly dipped below 1.33 on Friday for the first time since December 2020 as a new Covid-19 variant hit sentiment in global markets. The strain – which goes by the name Omicron – is believed to be more transmissible and have higher resistance to vaccines.

The emergence of the new variant in southern Africa sparked alarm amongst investors who scaled back their expectations for a Bank of England (BoE) interest rate rise next month, intensifying downward pressure on the pound.

Pound Sterling Forecast – Powered by Lumon