The Pound climbs even in the face of record high COVID cases.

Following news that the UK would not impose additional restrictions on the Omicron variant, sterling surged against most currency peers. The currency has come under fire, however, as a result of these rising numbers and greater staff shortages, which have hampered confidence in the currency going ahead.

This news occurred the same week that the UK recorded over 150,000 new cases each day, owing to significant staff shortages across the country’s workforce, which has resulted in members of the Armed Forces being pulled in to support NHS operations.

As seen by numbers revealed last week, the Pound’s gains are projected to have been hampered by a slowdown in growth across most, if not all, industries. The latest reading of the Purchase Managers Index for December revealed a significant slowdown in growth in the UK’s main services sector, owing to the fact that many hospitality businesses shrank over the winter due to a drop in bookings.

Finally, the Pound’s losses may have been bolstered by the possibility of an early interest rate hike by the Bank of England. Markets are pricing in an 80% possibility of an early interest rate hike by the BoE at their next meeting, owing to the US Federal Reserve’s recent hawkish policy shift and persistently rising global inflation. Is this enough to keep the wind in the Pound’s sails for a longer period?

GBP/USD Exchange Rate Forecast: Will Central Banks Raise Interest Rates Ahead of Schedule?

Is it possible that this approach will take hold in the United States? As we go ahead this week, it appears likely that the Pound will decline if December retail sales fall year-on-year as expected. A predicted increase in GDP growth for November could strengthen the euro on Friday. Forecasted declines in manufacturing and industrial production, however, might stifle any possible gains, as global supply chain constraints continue to stifle global economic growth.

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