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Central bank meetings take centre stage

Monday 13 December, 2021

Daily Currency Update

The pound has started the week firmly on the back foot. Boris Johnson announced on Sunday that Britain faces a “tidal wave” of new Omicron infections and that two vaccine doses may not be enough to contain it. New Omicron restrictions weighed heavy on the pound last week, as the government attempted to slow the spread of the new more transmissible variant before Christmas. The pound managed to recoup some losses vs. the euro getting back up into the mid 1.17s, having dropped into the low 1.16s late last week after the announcement of new restrictions.  Against the US dollar, the pound sits in the mid to low 1.32s, having also recovered from yearly lows at around 1.3160 last week. Thursday sees the Bank of England monetary policy meeting, and they have stated that they may wait on further information on the economic impact of the new variant before they raise rates next year. Many expected this to happen at Thursday’s meeting, but the latest fears over Omicron look to have potentially delayed rate hikes once more.

Key Movers

Markets will likely have their eyes on the three key central bank meetings this week. The Bank of England, the US Federal Reserve and the European Central Bank all have meetings due in what could be a very volatile week for FX markets. Wednesday's Federal Reserve meeting could see a change in the bank's view on inflation and they may announce a quicker tapering of bond purchases. If this happens and we see a more aggressive approach, we could see the US dollar push higher this week. The ECB meet on Thursday and consensus is that they might look to keep their options for tapering very open going into the new year, with no dramatic changes expected. EUR/USD currently trades around 1.1260.

Expected Ranges

  • GBP/USD: 1.3270 - 1.3190 ▼
  • GBP/EUR: 1.1705 - 1.1790 ▲
  • GBP/AUD: 1.8530 - 1.8595 ▲
  • EUR/USD: 1.1310 - 1.1235 ▼