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GBP/USD slumps to five-month low, trades below $1.37 amidst UK’s coronavirus woes

currency-newsGBP/USD slumps to five-month low, trades below $1.37 amidst UK’s coronavirus woes
The pound found itself on defensive on Monday, amidst growing concerns over the rapid rise in coronavirus cases in the UK.

Sterling appears to be licking its wounds so far this morning, with GBP/EUR subdued at €1.1577 and GBP/USD muted at $1.3651. GBP/CAD is rangebound at C$1.7423 while GBP/AUD and GBP/NZD hold steady at AU$1.8618 and NZ$1.9734 respectively.

Coming up, will more coronavirus uncertainty infuse further volatility into exchange rates today?

What’s been happening?

The pound faltered at the start of this week, as the lifting of nearly all remaining legal coronavirus restrictions in England, was overshadowed by the sharp surge in new cases across the country.

Health experts have grown increasingly critical of the move to lift restrictions, with many questioning the government’s decision at a time when daily infections are averaging over 50,000.

This further stoked speculation over the sustainability of the reopening, with GBP investors increasingly concerned that some restrictions will need to reimposed later in the year in order to keep hospitalisations at manageable levels.

Fears over the sharp rise in coronavirus cases in the UK and elsewhere in the world translated into significant safe-haven demand during yesterday’s session, initially resulting in a strong pick up in the US dollar.

However, the US dollar began to relinquish some of these gains later in the session, amidst a plunge in US Treasury yields.

Meanwhile, the euro, after initially succumbing to pressure from the US dollar, was able to mount a convincing recovery yesterday afternoon, in spite of there being no fundamentals underpinning the single currency.

What’s coming up?

There are no economic releases of note today, and as such movement in the currency market may continue to be dictated by coronavirus developments.

As such we expect to see the US dollar remain broadly supported as the spike in cases sees investors continue to favour safe-haven assets, with this upside in USD potentially coming at the expense of the euro.

At the same time, the pound could face an uphill battle today, as the UK’s deteriorating coronavirus situation is likely to place additional pressure on Sterling.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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