GBP/USD Weekly Projected: How Low May Sterling Fall? BOE And Fed Vow A Blast

Prime Minister Boris Johnson is under fire for allegedly hosting a Christmas party in his office last December when the country was under lockdown.

It was the PM’s political future that made Sterling bears happy. The Pound has already been hit by Johnson’s plans to impose more limitations due to the growing COVID-19 cases in the UK.

Winter weather, waning vaccination protection, and a possible wider spread than the new Omicron variety are also factors.

Researchers believe Omicron is extremely infectious but milder than earlier strains. Concerns about the virus raised the safe-haven Dollar, while optimism lowered it. Rising bond rates also benefited the greenback.

Higher Treasury yields make the Dollar more appealing. Positive US statistics have kept the currency strong.

The BOE Caps A Busy Week In The UK

How terrible is this winter’s wave? After Alpha and Delta, the UK is preparing for Omicron, which is likely underreported despite high levels of genetic sequencing undertaken in the UK. They will monitor everyday cases and hospitalizations.

The restriction is caused by pressure on the health system. Additional restrictions may weigh on Sterling, but stability in COVID data may allow it to climb.

The UK COVID Is Still Going Up

On Thursday, the Bank of England will make its judgment. Fears about the virus’ economic impact may persuade the BOE to keep rates steady after a “close call” in November.

Sterling is poised to respond after 2 out of 9 delegates dissented last time and voted to raise borrowing costs. The October unemployment rate is expected to be close to September’s 4.3%.

Will rising inflation force the BOE to raise rates? The November retail sales report might damage Sterling if the BOE maintains the Pound constant.

US Events: Almost Exclusively Fed

The Federal Reserve Chair, Jerome Powell, has requested that the term “transitory” be retired from inflation. Since his re-election and rising inflation, Powell has become more hawkish.

The bank began reducing its monthly bond purchases by $15 billion. Will it now taper to $20 or $25 billion?

In the spring, rather than in the summer, the first increase in borrowing costs might occur. Starting in January, with $20 billion each month, Powell is expected to urge speedier reduction.

Analysis Of The GBPUSD

GBB/USD CHART Source: Tradingview.com

The Pound/Dollar is extending its drop despite avoiding oversold circumstances. The RSI is above 30. This suggests the bears are still in charge, but the negative momentum has slowed.

Since late November, the spot rate has been moving in a downtrend channel, with daily lower highs and lows.

The 1.3195 swing low from late November is supported by the 1.3175 bottom from 2021. The GBP/USD pair will soon reach 1.3110 and 1.30.

The recent recovery attempt was restricted to 1.33, but the disparity between current prices and that high bar does not help cable rebound. 1.3350, which aided GBP/USD in November, now acts as resistance. The 1.34 line continues to distinguish ranges.