EUR/GBP: Three reasons why the pound seems vulnerable to covid variant news – ING

EUR/GBP is about 1% off its lows. Economists at ING expect the pair to move between 0.84-0.85 as the pound seems vulnerable to Omicron, the covid new variant. 

GBP may struggle to quickly recoup recent losses

“GBP seems to be vulnerable to covid variant news because: i) UK proficiency with gene sequencing means that the UK is more likely to spot and report new outbreaks in the community; ii) FTSE equity benchmarks are heavily-weighted to the miners and gets hit with commodities on demand shocks and iii) Bank of England tightening had been providing support for GBP, and the 16 December BoE decision looks to be even more in the balance/swinging to no change now.”

“It may take a couple of weeks before we know a lot more about Omicron and thus GBP may struggle to quickly recoup recent losses.” 

“We favour EUR/GBP to trace out a 0.8400-0.8500 range for the time being.”

See – UK: Five important structural changes since Brexit – Natixis