British Pound (GBP) Price Outlook: EUR/GBP Rally May Run Out of Steam

EUR/GBP PRICE, NEWS AND ANALYSIS:

• EUR/GBP will likely slip back after its rally over the past few days as the Euro was boosted by concerns about the Omicron variant of Covid-19 and whether existing vaccines will be effective against it.
• Meanwhile, a reshuffle of the UK Labour Party’s shadow Cabinet should have little impact on GBP even though opinion polls show Labour neck-and-neck with the ruling Conservatives
  
  

  EUR/GBP RALLY AT RISK AS OMICRON FEARS RECEDE

  The strong rally in EUR/GBP that has lifted it from a low of 0.8380 on November 22 to its current level close to 0.85 is under threat, principally on evidence that the Omicron variant of Covid-19 is more contagious and dominant than previous variants but also less deadly.

  It was news of Omicron that spooked the markets Friday and again this week, not helped by the chief executive of Moderna who was reported by the Financial Times as predicting that existing vaccines will be much less effective at tackling Omicron than earlier strains of Covid-19 and warning it would take months before pharmaceutical companies can manufacture new variant-specific jabs at scale.

  Now, however, it has also been reported that the new variant is not as deadly as previous ones and news of it could even be positive if it kills off more lethal strains. That should help the Euro generally, and specifically EUR/GBP, which remains within a downward-sloping channel and could struggle to make a long-lasting break above the 0.85 level.