Pound US Dollar Exchange Rate News: GBP/USD Dips from Seven-Week High as Coronavirus Continues to Spread

January 5, 2022 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Dips from Seven-Week High as Coronavirus Continues to Spread

GBP/USD Mixed as Coronavirus Continues to Dominate Global Stage

The Pound US Dollar (GBP/USD) exchange rate is trading flat in the beginning of today’s session in response to coronavirus cases remaining high.

At the time of writing, the GBP/USD exchange rate is trading at approximately $1.3539, with minimal market movement.

Pound (GBP) Rangebound amid Increase in Coronavirus Cases

The Pound (GBP) is muted against the US Dollar (USD) at the beginning of today’s session, despite refreshing a 7-week high earlier this morning, as coronavirus cases continue to spread across the UK.

According to the latest figures, there are 15,044 patients in hospitals across England suffering with Covid-19.

On Tuesday, it was reported that the UK had set another record high, reaching 218,726 cases within 24 hours. This is up by 51% from the previous week.

In spite of the increase in case numbers, UK Prime Minister, Boris Johnson insisted that the UK should ‘ride out’ the Omicron wave, and has since faced some backlash.

Dr Mike Tildesley, from the University of Warwick and a member of the Scientific Pandemic Influenza Modelling group, said:

‘The problem, of course, is that if you're thinking about introducing controls, once you're beyond the peak of the infection, then that has much less effect.

‘The next few days will be really, really key for us to try to identify that - children are going back to school, we've had sort of differences in mixing patterns over the Christmas period and we are yet to see what happens in the data as a result of that.’

On the other hand, Johnson’s suggestion than no further restrictions are likely to be reinstated in England offers some support to GBP exchange rates this morning.

US Dollar (USD) Directionless as Investors Await FOMC Minutes

Meanwhile, the US Dollar (USD) is trading flat against the Pound (GBP) as investors await the publication of the minutes from the Federal Reserve’s latest policy meeting.

The release of the Federal Open Market Committee (FOMC) minutes this evening may shed more light on the Fed’s policy plans for 2022, with USD investors seeking to gauge whether a March rate hike may be on the cards.

Moreover, demand for the ‘Greenback’ is also being supressed by a pullback in US Treasury yields this morning.

On the other hand, the high case numbers of the Omicron variant across the US, having reached a global high of 1 million cases per day, may be underpinning USD as it weighs on market risk appetite.

GBP/USD Exchange Rate Forecast: Will USD be Supported by Fed Minutes?

Looking ahead, the Pound US Dollar (GBP/USD) exchange rate is likely to be weighed on by US data releases and coronavirus advancements.

USD is likely to remain mostly directionless until the release of FOMC minutes this evening. Will a hawkish outlook from the FOMC bolster USD exchange rates?

Elsewhere the ISM non-manufacturing PMI for December is scheduled for release on Thursday, with the index forecast to slip from a record high of 69.1 to 66.9, but likely underpinning USD as this will still be a strong result for the US service sector.

Meanwhile, the UK’s final reading for December’s services PMI is forecast to drop from 58.5 to 53.2, showing a slowing of growth in the UK’s vital services sector.

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