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- GBP/USD is in bearish consolidation amid fresh covid and Brexit jitters.
- Safe-haven USD holds the reins starting out a fresh week.
- Covid updates, risks trends to lead the sentiment amid a light docket.
GBP/USD is trading modestly flat below 1.3350, consolidating its recovery from eleven-month lows of 1.3278 amid a minor improvement in the risk sentiment.
Despite the risk reset, the risks remain skewed to the downside for the major, as it continues to bear the brunt of the latest Omicron covid variant and ongoing Brexit woes.
Omicron woes add to the Brexit pain
The risk sentiment took a hit in early Asia, helping the rebound in the US dollar across the board, as fears over the latest covid strain took over and rattled markets. South Africa’s latest surge of COVID-19 cases, apparently driven by the new variant is leading countries around the world to impose new restrictions.
However, markets are trying to find their feet amid a few optimistic news concerning the new variant, with Professor Dror Mezorach, head of the coronavirus department at Hadassah University Hospital Ein Karem, noting that the clinical condition of people infected with Omicron is encouraging.
Despite the risk recovery, the sentiment around the pound is likely to remain undermined, courtesy of the ongoing Brexit concerns. The European Commission’s vice president Margaritis Schinas on Saturday told Britain it has to sort out its own migrant problems post-Brexit.
Meanwhile, French President Emmanuel Macron hit out at the UK Prime Boris Johnson on Friday over a tweeted letter, accusing him of being “not serious”. This is in light of the persistent tensions over the French-UK fishing row.
Looking ahead, amid the data-light UK and US economic calendar on Monday, the Omicron covid variant updates and their impact on the risk sentiment will continue to lead the way.
Investors will reassess the Bank of England’s (BOE) rate hike expectations, in the face of the latest covid strain, which could be an additional downer for the British currency.