GBP/USD to tank towards 1.30 as BoE unlikely to raise interest rates this month – Scotiabank

GBP/USD retains a soft tone amid Omicron covid concerns. The cable aims for the 1.30 level amid limited support markers, economists at Scotiabank report.

Bank of England’s rate hike expectations pushed back

“Uncertainty remains around the severity and speed of contagion of omicron in the UK and thus the BoE will likely hold fire next week. In combination with a hawkish Fed, we see the GBP possibly heading back toward the low 1.30s before gains resume in Q1 as the BoE tightens.”

“The PM’s waning popularity within the Tory ranks (as he announced the virus measures earlier possibly to distract from a staff Christmas party in 2020) risks political anxiety in the UK that will likely weigh on the GBP in the weeks ahead with a slight chance that he faces a confidence vote.”

“The 38.2% Fibonacci retracement of its 2020-21 climb at 1.3165 stands as support followed by a psychological trigger at 1.31.” 

“Intraday resistance is 1.3200/15 and then 1.3240/60.”