Market news

17 December 2021

GBP/USD retreats further from monthly high, below 1.3300 amid COVID-19 woes

  • GBP/USD witnessed some selling on Friday and moved further away from the post-BoE high.
  • COVID-19 woes turned out to be a key factor that acted as a headwind for the British pound.
  • The risk-off mood benefitted the safe-haven USD and contributed to the intraday selling bias.

The GBP/USD pair traded with a negative bias heading into the North American session and was last seen hovering near the daily low, just below the 1.3300 mark.

Following an early uptick to the 1.3335-40 region, the GBP/USD pair witnessed some selling on Friday and extended the previous day's retracement slide from the 1.3375 area or a fresh monthly high. As investors looked past the Bank of England's surprise rate hike on Thursday, the worsening COVID-19 situations in the UK turned out to be a key factor that undermined the British pound.

Meanwhile, worries about the economic risks emerging from the rapid spread of the new Omicron variant of the coronavirus continued weighing on investors sentiment. This was evident from a generally weaker tone around the equity markets, which assisted the safe-haven US dollar to reverse an intraday dip to a one-week low. This was seen as another factor that exerted pressure on the GBP/USD pair.

Apart from this, the Fed's hawkish outlook, indicating at least three rate hikes next year, further acted as a tailwind for the greenback. As investors digest the latest monetary policy updates by key central banks, the broader market risk sentiment will drive the USD demand. This, in turn, should provide some impetus to the GBP/USD pair amid absent relevant market moving economic releases.

Technical levels to watch

 

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