Pound weakens as UK prepares for Omicron restrictions

Travel and leisure stocks are suffering thanks to impending plans to place restrictions that could dampen December consumer spending. US stocks are on the rise as Pfizer states that their vaccine could be efficient under a three-jab regimen. 

• US markets outperform as Europe loses traction 
• Sterling weakens on talk of fresh Covid restrictions 
• Pfizer study strengthens the case for a third jab to combat Omicron 

US markets are outperforming their European counterparts, as fears over impending and ongoing restrictions dampen sentiment. While US cases are also on the rise, Joe Biden’s unwillingness to propose lockdown measures as a means to quell the spread signals less risk for stocks. The dollar strength story continues apace thanks to the view that the Fed will be given an environment which would be conducive to faster tapering and an early 2022 rate hike.  

Sterling has been on the receiving end of selling pressure today, with the UK seemingly on the cusp of a fresh bout of restrictions thanks to the rapid growth Omicron cases. GBPUSD dropped into levels not seen since almost a year ago, with traders weighing up the monetary policy implications of future restrictions. Goldman Sachs has shifted their Bank of England rate expectations in response to this latest surge in Omicron, with analysts across many of the top investment banks expecting to see the MPC hold off in favour of a February rate hike. Travel and leisure stocks are also lagging behind in the UK, with recent optimism starting to wane on the prospect of greater government oversight. Nonetheless, it is important to note that while short-term measures to slow the spread of the virus may dampen economic activity over the short-term, the recent data has certainly helped allay some of the fears evident within markets last week.  

A raft of early studies into the effectiveness of current vaccines have provided a somewhat inconsistent set of findings. This latest variant appears to do a good job of evading much of the protection afforded by infection or vaccines, with preliminary data showing that antibodies are 41 times less effective against this strain. However, Pfizer have provided a more positive outlook, after finding that a three-dose regimen of their vaccine has a strong neutralising effect against Omicron in the lab. With the Pharmaceutical firm planning to have a specialised Omicron jab ready for March 2022, there is plenty of reasons for shareholders to expect the bumper Covid revenues to roll through into future years.