GBP/USD treads water around 1.3200 as Omicron teases UK lockdown

• GBP/USD struggles for clear direction around yearly low, steady after two-day downtrend.
• UK PM Johnson reserves lockdown possibilities, Imperial College of London highlights Omicron fears while new Brexit Minister has contrasting past.
• US reports first variant-linked death but stimulus chatters, year-end positioning favor risk sentiment of late.
• US President Biden’s speech, virus updates and Brexit news are crucial for cable traders.

GBP/USD seesaws around 1.3210 while portraying the sluggish Tuesday morning Europe, after two days of bearish play. The cable pair’s latest moves could be linked to the trader’s inactivity amid a lack of major data/events and the year-end consolidation. However, the sellers remain hopeful as the UK struggles with the South African covid variant, dubbed as Omicron.

With the second-highest daily infections in the UK, the latest being 91,743 per Reuters, British Prime Minister (PM) Boris Johnson said, “We have to reserve the possibility of taking further action on Covid-19. We will rule out nothing in the fight against Covid-19, he said, adding that we will go further if we need to.” It’s worth noting, however, some of the key UK policymakers, including Chancellor Rishi Sunak, oppose the activity restrictions during the holiday period and hence the GBP/USD traders remain indecisive and dormant of late.

On the same line were comments from the Imperial College of London that said, “Infections caused by the Omicron variant of the coronavirus do not appear to be less severe than infections from Delta.”

Elsewhere, UK Foreign Minister Liz Truss campaigned for “Remain” and the same doubts over her capacity to play Brexit role after David Frost quit. Even so, the covid variant is more in focus and challenges the GBP/USD traders.

Additionally, the US reports the first death linked to Omicron, in Texas, after the US Disease Control and Prevention (CDC) said, per Reuters, “Omicron is now the most common coronavirus variant in the US, accounting for nearly three-quarters of COVID-19 cases.” Further, comments from the World Health Organization (WHO) and the Imperial College of London also cited fears of a faster pace of the virus variant spread.

Meanwhile, chatters that Omicron will peak in 8-10 weeks, backed by Morgan Stanley, join hopes of US President Joe Biden’s ability to roll out the Build Back Better (BBB) despite Senator Joe Manchin’s rejection to vote in favor, seem to underpin the latest market consolidation amid a quiet session.

Amid these plays, the US 10-year Treasury yields keep the previous day’s bounce off the 16-month-old support line near 1.42% whereas the S&P 500 Futures rise 0.61% by the press time.

Moving on, US President Joe Biden’s address to the nation will be important to watch even as White House Press Secretary Jen Psaki mentioned that the speech, “Will not be about locking the country down.” Above all, Omicron updates and chatters concerning US BBB will be the key ahead of Wednesday US inflation-related data.

Technical analysis

Unless crossing the previous support line from late September, around 1.3315, GBP/USD remains vulnerable to refresh the yearly low, currently near 1.3160.