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Jamie Jemmeson
December 9, 2021

GBP USD Hit Fresh 2021 Lows as Plan B Restrictions are Introduced

Sterling Remains Under Pressure Amidst Risk Off Tone

Yesterday, the Sterling was on the backfoot due to two main reasons and their knock-on effects. Political pressure continues to mount on Prime Minister (PM) Boris Johnson following the release of a mock press conference video that allegedly took place last December at No. 10 Downing Street during lockdown. Some are also suggesting that this is a by-product of the political pressure coming from the introduction of Plan B restrictions to take effect in 5 days. The restrictions are unlikely to cause the Bank of England (BoE) to raise interest rates in next week’s policy meeting. However, the markets will continue to drift lower while having a probability of an increase later. 

The net result of yesterday’s events was GBPUSD hitting a fresh low for 2021. The markets will continue to monitor the Omicron situation and articulate what impact the latest set of restrictions will have.

Labour Data Continue to Paint a Mixed Picture

Further labour data continues to paint a mixed picture of the scenario. US JOLTS data registered an increase in job openings to 11.03mn in October from a revised 10.6mn in September and well above consensus forecasts of 10.4mn, indicating a tight labour market. Although, there was a slight moderation in the quits rate contrary to the non-farm payrolls.

Expectations that the Federal Reserve (Fed) would take a hawkish stance at next week’s policy meeting continue to increase and potentially accelerate the rate of stimulus withdrawal. Markets will also monitor the rhetoric surrounding interest rates. The news that Pfizer expects three vaccine doses to provide adequate protection against the Omicron variant may reduce concerns.

Looking to the day ahead, it is fairly quiet with the jobless claims data on the wires.

Greece Records Highest Q3 GDP Growth in Eurozone

There was little in the way of key Eurozone data released yesterday, although the single currency held a firmer tone against its major rivals. Comments from the European Central Bank’s (ECB) Vice President de Guindos stated that current COVID-19 restrictions across the bloc would not “derail the Euro area recovery” and that there is no evidence of second-round inflation effects. Elsewhere, Greece recorded the highest Growth Domestic Product (GDP) year-on-year (Y.O.Y) in the Eurozone during Q3 of 2021. According to the statistics agency, Eurostat, Greece’s Q3 GDP grew by 13.7% versus an average growth rate amongst EU countries of 3.9%.

Looking ahead to today, the National Bank of Hungary is due to announce any policy changes to its weekly deposit rate which currently reads at 3.10%. This will be interesting as markets currently expect the Central Bank to raise its base rate by an additional 30 bps at their policy meeting next Tuesday. Aside from this, there are very few Eurozone data releases to provide much direction for the Euro as markets continue to watch the development of Omicron.

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