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Can sterling break higher or will GDP data cap recent gains?


The South African early studies into Omicron may prove right in their initial assessment, as the UK HSA may be about to release a document concluding that Omicron is not as harmful as Delta. This may come too late for the UK service and hospitality sectors who are suffering due to the current Plan B measures.


Market Brief


The UK Health Security Agency will release its early data on the severity of the Omicron variant of COVID-19 before Christmas. In their findings, it is believed that most Britons appear to suffer from a milder disease caused by the Omicron coronavirus variant than the Delta strain. If this is true it will give the UK government a more bullish tone going into the new year and with a milder disease the severity of the lockdowns will be reduced in scale and time. The UK government has already reduced the self-isolation period from 10 days down to 7 days.


Data released today from the Office for National Statistics (ONS) says that the British economy grew 1.1% quarter on quarter in the three months to September of 2021, which is below initial expectations of a 1.3% increase, and down from a downwardly revised 5.4% growth in the three months prior. A growth of 1.4% was noted in the services sector, whereas 0.1% and 1% fell in the production and construction sectors, respectively. Manufacturing declined by 0.7%. Yesterday the UK Treasury announced a spending package to help the service sector that is being hit by the fears around Omicron.



The GBPUSD is currently testing the intraday resistance level that printed before the Bank of England rate hike announcement, and as it is rising in a neat channel, there is a high probability that cable tests lower today. The intraday moving averages are coiling around each other and with economic news matching current sentiment around the UK, the pound is going to find rallying hard unless we get some really good headline news.



Adding to the bearish tone around the GBPUSD is the more positive price action in the US dollar index. Currently price in the DXY is trapped between $97 to the upside and is supported by $95.50, but overall the bull flag is expected to break higher.


Across the pond in NYC, Mayor Bill de Blasio announced that the city will give $ 100 to each of the city's residents who receive a booster dose of the COVID-19 vaccine. "This will be by far the biggest booster incentive program in the United States of America," he told reporters. "This is the moment, come out in real big numbers, get those booster shots and help make your family safer and help make this whole city safer." Not sure we'd see the same gesture from London Mayor Khan.


Yesterday, private data showed that crude inventories in the United States decreased last week. According to the American Petroleum Institute (API), its weekly report stated that US crude stockpiles dropped by 3.7 million barrels. Pointing to an increase in demand and a more hawkish economy. The report is also said to have shown a jump of 3.7 million barrels in gasoline inventories, which is a signal that drivers are rejecting the higher prices at the pump or that they need their cars less as we go into the holiday season. We now await official figures from the Energy Information Administration (EIA) scheduled for later today.



Brent tests the recent swing lows and the daily 200 EMA and found buyers but the 20 and 50-period EMAs are acting as a decent dynamic resistance. A less worrisome Omicron variant would see demand come back for oil



At the start of the London session the forex heatmap offers little directional bias though the positive oil inventory data is lifting the CAD. The weakest currency relative to the others is the Australian dollar so commodity pairs are very mixed.

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