EUR/GBP is stuck in a range as covid-19 concerns investors

• EUR/GBP price action is at the hands of the omicron variant. 
• The UK is facing the worst wave but UK's PM Boris Johnson says that there will be no new restrictions, for now.

Since a month ago when the World Health Organization (WHO) announced that Europe was once again "at the epicentre" of the Covid pandemic as cases soared across the continent, the UK, France and many other nations are still at the peak of their infection curves. 

In response, Europe’s biggest countries are introducing more curbs to fight the surges in Covid-19 infections as the highly-transmissible omicron variant slams already weary populations. Germany, which is reported to be 67% of the peak of its infection curve, designated the UK as a virus variant area from Monday, the highest risk category.

As omicron cases surge in the UK, the country faces the politically perilous decision of whether to tighten restrictions. Total Covid infections rose by about 50% in a week to touch a record 93,000 on Friday. However, on the day where the UK reported its second-highest daily covid tally, the UK's PM Boris Johnson says that there will be no new restrictions in England for now. On the other hand, he said that ''we have to reserve the possibility of taking further action on covid.''

The markets are of the mind that new restrictions are inevitable. Plan B is argued by some as not enough to control the spread of Omicron. SAGE is advocating for new stricter measures as soon as possible as they forecast that hospital admissions would likely reach 3,000-10,000 per day with Plan B restrictions (peak in Jan-2021 was 4,500).

However, regardless of new restrictions, if implemented. voluntary social distancing could have a similar effect, with fewer people travelling or using public services, eating out in restaurants and so forth. This is already happening in London for example. 

''In a best-case scenario where no new restrictions are introduced and Omicron causes far fewer hospital admissions than Delta, the models estimate that UK GDP will fall around 0.6% by January,'' analysts at TD Securities explained. ''In a worst-case scenario with strict restrictions and high hospital admissions, GDP is estimated to fall around 5.8%.''

Meanwhile, European nations have taken a varied approach to counter the winter Covid wave. The Dutch have imposed the strictest of lockdowns which mean schools and non-essential shops are closed and fewer visitors will be allowed in households.

Germany, France and Cyrpus are imposing stricter rules for travellers from Britain from outright banning to 14-quarantine upon arrival. France is curbing outdoor revelry on New Year's Eve and is turning up the pressure on people to get vaccinated whereby immunized people will be able to get a health pass that gives access to bars, restaurants, medical facilities and cultural venues.

''French Labor Minister Elisabeth Borne will meet with business and labour leaders Monday to discuss the possibility of requiring health passes at work. Unions say such a move would effectively make vaccines mandatory in France,'' Bloomberg reported. Spain and Italy's governments will convene will hold emergency meetings to analyze their own nation's epidemics and the evolution of the disease to determine their own call to action and adaptations of new measures to curb the spread. 

It's muddy waters for now with regards to EUR/GBP's direction. It has been stuck in the weekly range since March of this year between a peak of around 0.8720 and a low of 0.8380 and there are little signs of a breakout one way or the other. There was a strong weekly bearish bar printed in the middle of November but that was met by an equally strong recovery from the lows of the weekly range. 0.8450 and 0.8600 looks to be the parameters for the near future.

EUR/GBP technical analysis

The daily chart is leaving a W-formation as follows:

The daily chart's W-formation is a reversion pattern and the price would be expected to revert back to test the neckline support of the pattern in due course. This is a price action that would be anticipated to evolve on a bearish hourly chart in the coming sessions.