The Pound US Dollar (GBP/USD) exchange rate fell this morning as Pound (GBP) sentiment weakens with the spread of the Covid Omicron variant throughout the UK. Meanwhile, US Dollar (USD) trading is subdued by a generally upbeat market mood, limiting ‘Greenback’ gains.
At the time of writing, GBP/USD is trading at $1.3188, down 0.4% from today’s opening levels.
Pound (GBP) Exchange Rates Pressured by Rise in UK Covid Cases
Concerns over the spread of the Omicron variant are weighing upon the Pound today, as Britain reports 101 new cases. The total number of Omicron cases diagnosed as of yesterday stood at 437.
Exacerbating experts’ fears, an early study in South Africa has found Pfizer’s Covid-19 vaccine provides some protection from the variant, but does not guarantee immunity.
Researchers at the Africa Health Research Institute in Durban found the vaccine resulted in an approximately 40-fold reduction in levels of neutralising antibodies produced by people who had received two doses of the Pfizer-BioNTech SE shot.
At this stage, it is still unclear to what extent omicron is capable of evading the body’s immune response, or the severity of disease it causes. Meanwhile, growing belief that the UK could face a sudden rise in cases ahead of Christmas has sparked alarm.
Analysis by Professor Christina Pagel, director of the Clinical Operational Research Unit at University College London, suggests that Covid cases could hit 90,000 a day by Christmas: while one member of sage says the figure is a ‘worst-case scenario’, other experts reckons the estimate could be ‘slightly optimistic’.
Meanwhile, NHS leaders have cautioned that there are already ‘huge amounts of pressure’ on hospitals, with nervousness in the health service growing as doctors and nurses face the risk of catching the virus themselves.
Cases of upwards of 90,000 per day could translate into ‘more people seeking medical help, more pressure on GPs, and in particular on A&E departments.’
‘This will be even more difficult to manage as they attempt to deal with the pressures and keep infected patients separated from those who are ill with other health issues.’
US Dollar (USD) Exchange Rates Face Pressure Amidst Risk-On Mood
The US Dollar is trending down against the majority of its peers, as a risk-on market mood limits USD upside.
Trading sentiment is upbeat on account of reportedly milder symptoms associated with the Omicron Covid variant, as well as sustained tailwinds from China’s pledge to support economic growth.
Anxiety ahead of the US inflation data release on Friday has also helped to soften the US Treasury bond yields, damaging ‘Greenback’ appeal – nevertheless, hopes of faster policy tightening from the Federal Reserve help to limit downside.
Geopolitical tensions between Russia and the US also hint at the prospect of reduced risk appetite ahead, restoring the safe-haven appeal of the US Dollar. US President Joe Biden recently threatened to impose economic and other measures on Russia if it invades Ukraine.
Looking ahead, this afternoon’s JOLTs job openings data is likely to provide further trading impetus: vacancies in October are expected to have decreased on the month previously, albeit only slightly, indicating that the labour shortage is becoming less acute.
Quits are also estimated to have lessened, implying that people are happier in their jobs than earlier in the year, when low wages and poor working conditions spurred employees to search for new jobs.
GBP/USD Exchange Rate Forecast: Jobs Data to Inspire Movement?
The main market-moving stimulus this afternoon is likely to be the US jobs data, which could further pressurise the GBP/USD exchange rate if fewer vacancies are reported as expected.
A decrease in job vacancies indicates a reduced labour shortage – one of the knock-on effects of the Covid pandemic.
Also driving movement will be market sentiment – further Sterling downside on the spread of Omicron may steepen the decline of the Pound US Dollar exchange rate.