The Pound lost value against most peers on Thursday following the announcement of the government’s Plan B restrictions to curb the spread of the Omicron variant.

The work from home instruction represents the largest downside risk to the economy as spending moves away from business districts like the West End and the City of London.

"Fresh restrictions are a big setback for businesses, particularly for those in hospitality and retail who are in a critical trading period, as well as others such as transport," according to Matthew Fell, CBI Chief Policy Director at the CBI, following Prime Minister Boris Johnson’s Plan B announcement.

The Pound to Euro rate declined 0.75% on Wednesday to reach a month-low of 1.1626. The Pound to Dollar rate dropped to a new one-year low of 1.3166.

"The Pound is selling off on potential Christmas Covid & WFH/Plan B restrictions generating a roll back on BOE hike expectations for Dec. Would expect Sterling to continue weighing against both the USD & other G10. Looks to be further downside momentum ahead into year end," said Neil Jones, Head of FX Sales, Financial Institutions at Mizuho.

Furthermore, most analysts are united in their predictions that these latest developments will make the Bank of England hold rates steady at the upcoming 16 December meeting: "For GBP, the increased likelihood of limits on economic mobility comes just a week before a finely-balanced BoE meeting," stated Daragh Maher, Head of U.S. FX Strategy at HSBC. "Our economists expect uncertainty over the Omicron variant to encourage policymakers to be patient."

At the time of writing, the odds of a rate hike this month are 0%, as per IOS markets, compared to 33% the day before.

This would now allow for a floor in Pound exchange rates to develop, reports Pound Sterling Live. That said, this could impact February rate hike forecasts, which may be a further source of weakness for Sterling.