Pound US Dollar Exchange Rate Refreshes Seven-Week High as England to ‘Ride Out’ Omicron Wave With No New Restrictions

GBP/USD Exchange Rate Buoyed by Boris Johnson’s Resistance to Further Curbs 

The Pound US Dollar (GBP/USD) exchange rate is currently trading at its best levels since early November, following Boris Johnson’s confirmation that no new curbs are planned for England during the current wave of Covid infections.   

At the time of writing the GBP/USD exchange rate is trading at around $1.3546, virtually unchanged from this morning’s open levels. 

Pound (GBP) Firms as No New Covid Restrictions Planned for England 

The Pound (GBP) is underpinned by Covid optimism this morning, after Prime Minister Boris Johnson suggested there is a ‘good chance’ that England will not see any further Covid restrictions imposed during the current wave of infections. 

Despite daily cases rocketing to a new record high, Johnson insists England can ‘ride out’ the Omicron variant ‘without shutting down our country once again’. 

At a press conference on Tuesday, the PM said that England will stick with the government’s Plan B restrictions, which includes working from home guidance, and mask requirements in most public spaces. 

The confirmation that England is unlikely to see anymore Covid restrictions was cheered by GBP investors who propelled the Pound US Dollar exchange rate sharply higher on Tuesday. 

Further buoying the Pound is growing speculation the Bank of England (BoE) will raise interest rates at its next policy meeting in February

CME Group’s BoEWatch tool currently places the odds of a rate hike next month at around 82%, with analysts predicting the Monetary Policy Committee (MPC) will look to take proactive steps in order to curb inflation in the UK. 

US Dollar (USD) Muted ahead of FOMC Minutes 

At the same time, the US Dollar (USD) is mostly muted so far this morning as investors await the publication of the minutes from the Federal Open Market Committee’s (FOMC) December meeting. 

USD investors will be looking to see whether there is any appetite amongst members of the Federal Reserve’s FOMC to accelerate the current tightening cycle as they attempt to gauge the chances of a rate hike in March. 

Elsewhere, demand for the US Dollar has been dented this morning amidst a pullback in US Treasury yields. 

Pound US Dollar Forecast: Drop in ADP Employment Growth to Weaken the US Dollar? 

Looking ahead, the Pound US Dollar exchange rate could tick higher again later this afternoon with the publication of the latest US ADP employment change figures. 

December’s release is forecast to report US employment growth slowed from 534,000 to 400,000, potentially weakening expectations for Friday’s more influential non-farm payroll figures. 

Meanwhile the publication of the latest UK services PMI could dent the Pound on Thursday, if December’s finalised index confirms service sector activity dropped dramatically following the outbreak of Omicron in the UK. 

Matthew Andrews

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