The pound has stayed rather static for some days due to rising COVID-19 cases and the spread of the Omicron strain putting pressure on the currency. The GBP/USD exchange rate is about $1.3400 at the time of writing, which is almost unchanged from figures from the past two days.
Sterling Moves Little as the Number of COVID-19 Cases in the UK Reaches a New High
The pound has remained dormant amid a risk-on trading environment, as the UK recorded a new record number of COVID-19 cases last week. Workforce sickness and self-isolation periods have resulted in serious staff shortages in industry and transportation networks. Prime Minister Boris Johnson stated last Monday that no new restrictions would be imposed before Christmas, but that they could be implemented sooner if necessary.
Preliminary studies conducted by the UK Health Security Agency (UKHSA) found that Omicron posed a decreased risk of hospitalization when compared to other variations. This news may help to push up the Sterling today. While this is a piece of encouraging news, UKHSA Chief Executive Jenny Harries cautioned that it is an early result and that it was necessary to make more findings.
Impending Brexit Constraints Could Also Limit Sterling
Today, as the deadline for new customs laws approaches on January 1st, the pound’s movement might be restricted by Brexit’s potential limitations. According to statistics obtained by the British Chambers of Commerce, 60% of firms have already faced difficulty exporting goods to the EU under the Trade and Cooperation Agreement (TCA) that will be implemented in January 2021.
Renewed conflicts over UK-French fishing rights are also set to strain Sterling, with France announcing this week that it will take legal action against the UK in the new year.
Moving forward, the pound rate is anticipated to be influenced by the UK government’s reaction to the increasing COVID-19 case figures. Sterling is projected to decline if the government decides to impose new restrictions after Christmas. Otherwise, the pound may continue to rise gradually.
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