Pound extends weakness on signals of new Covid restrictions
Cable lost traction and fell to new December’s low in December, coming under fresh pressure on reports that new Covid rules in the UK are imminent.
Media reports suggest that PM Johnson could introduce new restrictions to curb the spread of new Omicron variant, with new measures to be implemented as early as tomorrow.
This would further weaken the pound ahead of highly anticipated BoE policy meeting next week.
Some policymakers say not sure on how they will vote, although expectations for a rate hike on surging inflation are still high, despite official consensus of economists for unchanged policy.
The central bank expect price pressures to continue to increase in the first half of 2022, seeing inflation above 5% before it starts easing.
Pound will likely rise if the BoE opts to increase interest rates on Dec 16 meeting, but may lose ground if BoE surprises again.
The pair is pressuring a key supports at 1.3160 zone (Fibo 38.2% of 1.1409.1.4249 rally / 200WMA) break of which would result in sub-1.30 drop.
The base of thick weekly cloud offers strong resistance at 1.3250 which should cap and keep bears firmly in play.
Res: 1.3250; 1.3275; 1.3345; 1.3358
Sup: 1.3160; 1.3134; 1.3100; 1.3046