GBP/USD crashes out of the sky on hawkish Fed Powell, covid Omricon contagion risks


  • GBP/USD plummets on risks of contagion and a hawkish Federal Reserve. 
  • Vaccines may not be effective against the new covid Omicron variant.

Sterling fell to a one-year low versus the US dollar Tuesday due to the sentiment of divergence between the Federal Reserve and the Bank of England following hawkish comments from Fed's chairman Jerome Powell. At the time of writing, GBP/USD is trading at 1.3250 and down around 0.5% on the day so far, falling from a high of 1.3370 and crash landing at 1.3194.

Fed's Powell, who was making a testimony before the Senate, said that it is time to retire the term "transitory" for inflation. Additionally, he considers it appropriate to talk about speeding up tapering in the upcoming December meeting. On that, the US dollar took off and the euro plunged, dragging the pound along for the ride as investors weigh the risks of the contagion of the Omicron coronavirus variant and the concerns that there is no effective vaccine solution, yet. 

Risk assets were under pressure after Moderna Chief Executive Stéphane Bancel told the Financial Times that existing COVID-19 vaccines are unlikely to be as effective against the newly detected variant as they have been previously. On the other hand, there are mixed messages with the CEO of BioNTech saying the current generation of Covid-19 vaccines will probably still protect against severe disease in people infected by the omicron variant. However, drugmaker Regeneron Pharmaceuticals Inc said on Tuesday its COVID-19 antibody treatment could be less effective against Omicron.

Nevertheless, the uncertainty has rocked the socks off risk assets. The markets have also got what they were waiting for in Powell's testimony today, firming the belief that the Fed may still have to hike sooner than first expected despite the threat of the virus. However, it is yet to be seen as to what the Bank of England's bias will now be. 

BoE in focus

Inflation has moved sharply higher in the UK, but the BoE has remained firmly with the opinion that inflation will be transitory whereby the three components, food, energy, and autos price has been affected by the supply chain blockages and re-opening of the economy.

Wage data is also mixed, analysts at TD Securities argued. ''Headline wages are distorted by furlough and compositional effects, but underlying pay growth is still rising. Flash October PAYE pay data shows the first drop in median pay since the early days of COVID, as the furlough scheme ended.''

''The BoE's Dec meeting remains finely balanced. A single hike before March is all but certain, but Omicron may hold the MPC off until February.''

GBP/USD

Overview
Today last price 1.3253
Today Daily Change -0.0050
Today Daily Change % -0.38
Today daily open 1.3303
 
Trends
Daily SMA20 1.3448
Daily SMA50 1.3579
Daily SMA100 1.369
Daily SMA200 1.3817
 
Levels
Previous Daily High 1.3363
Previous Daily Low 1.3288
Previous Weekly High 1.3457
Previous Weekly Low 1.3278
Previous Monthly High 1.3834
Previous Monthly Low 1.3434
Daily Fibonacci 38.2% 1.3317
Daily Fibonacci 61.8% 1.3334
Daily Pivot Point S1 1.3273
Daily Pivot Point S2 1.3242
Daily Pivot Point S3 1.3197
Daily Pivot Point R1 1.3348
Daily Pivot Point R2 1.3393
Daily Pivot Point R3 1.3424

 

 

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