Fundamental view:

The British pound initially rallied but later gave up the gains against the US dollar during the trading course of the week. Markets have initially reacted positively to the interest rate hike coming out of the Bank of England outweighing Omicron’s fears but have wiped out all of those gains from Thursday. The US Federal Reserve and the Bank of England made an announcement of their monetary policy decisions. The Fed made an increment in the reduction in bond-buying on a monthly basis to $30 billion, from $15 billion as announced in November, starting from January 2022. Which means that the central bank will stop buying  $20 billion Treasuries and $10 billion Mortgage-Backed Securities per month, and also means sooner rate hikes.

On the other hand, Bank of England after surprising in November by refusing from raising rates shocked markets by the rate hike. Bailey explained the move as reacting to high inflation – 5.1% according to the new read for November and rising wages. The near-unanimous 8:1 vote added impetus to the surprise, which boosted the sterling.  The rapid spread of the Omicron variant in the UK had a negative effect on the sterling. That said, Sterling was hurt more by the politics of dealing with the virus than its spread. Prime Minister Boris Johnson faced the largest rebellion of his Conservative Party so far in his premiership when passing new restrictions, amidst that other scandals also hurt his authority. 

US PPI monthly report on 14^th December and UK Markit/CIPS Manufacturing PMI on 16^th December created downtrend whereas UK Claimant Count Change on 14^th December and US Initial Jobless Claims on 16^th December created uptrend for the pair in this week.

The major economic events deciding the movement of the pair in the next week are UK Public Sector Net Borrowing at Dec 21, UK GDP quarterly report, US GDP quarterly report, US CB Consumer Confidence Index, EIA Crude Oil Stocks Change at Dec 22, US Core Durable Goods Orders monthly report, US Initial Jobless Claims and Michigan Consumer Sentiment at Dec 23.

GBP/USD Weekly outlook:

Technical View:

Last week’s high was 0.64% higher than the previous week. Maintaining high at 1.3374 and low at 1.3171 showed a movement of 203 pips.

In the upcoming week we expect GBP/USD to show a bearish trend. The currency pair is trading below the 200 Simple Moving Average and the MACD trades to the upside. Should 1.3147 proves to be unreliable support then the pair may fall further to 1.3057 and 1.2944 respectively whereas a solid breakout above 1.3350 will open a clear path upward to 1.3463 and then will further raise up to 1.3553. Chart formation of rising wedge pattern breakout in H4 chart creates prospects of a bearish trend. Bearish engulfing pattern formation further escalates the expectation for a bearish trend.