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GBP/USD is set to have a volatile week.
The United Kingdom is expected to go into overdrive using Omicron boosters.
The Bank of England will remain unchanged on Thursday, while the Fed will provide more direction.
Boris Johnson, the beleaguered UK Prime Minister, has stated that everyone over the age of 18 in England would be given a booster shot this week, citing a ‘tidal wave of Omicron’.
The new emergency vaccination campaign will enlist military assistance and aim to provide up to 1 million jabs per day in order to meet the ambitious goal of providing a third vaccine to every eligible adult in England by the end of the year.
While the spread of Omicron remains a severe danger to the UK economy, macro data will be the key driver of the Sterling price movement this week. On Tuesday and Wednesday, closely watched employment and inflation figures will be released, followed by the latest Bank of England policy decision on Thursday.
Expectations for a 15 basis point interest rate hike had been fully priced in the run-up to this meeting, but over the last few weeks, the spread of the new covid-19 variant has seen these expectations erode, with the market now expecting the BoE to leave all policy settings unchanged until the February meeting. The US Federal Reserve Bank will release its newest monetary policy decision one day before this decision.
While the bank’s interest rate will remain unchanged, the bond-buying program (QE) is likely to be reduced further, while the newest Fed dot plot predicts at least two 0.25 percent rate rises next year, and maybe three.
Cable has been under pressure in recent months as a result of a strong US dollar and a weak British pound. Cable has been trapped in a well-defined downtrend from an early-June high of 1.4249, with lower highs and lower lows dominating market action all the way down to 1.3162. GBP/USD is now trading at 1.3225, attempting to establish a base slightly above its recent multi-month low.
Retail trader data reveal that 72.03 percent of traders are net-long, with a long-to-short ratio of 2.58 to 1.
The number of traders net-long is 3.21 percent higher than yesterday and 4.01 percent lower than the previous week, while the number of traders net-short is 2.96 percent higher than yesterday and 30.22 percent higher than the previous week.
We normally adopt a contrarian approach to the public mood and the fact that traders are net-long signals that GBP/USD prices may fall further. Positioning is more net-long today than yesterday, but less net-long compared to last week. The combination of current attitude and previous adjustments results in an additional mixed GBP/USD trading bias.