Global fears concerning the rapid spread of the COVID-19 Delta variant continue to weigh heavy on the markets, forcing investors to turn to safe havens, creating a ‘risk-off’ trading environment. Yesterday the UK recorded another 35,551 COVID-19 cases, the highest number since early February. The recent surge in new cases comes after Boris Johnson revealed his government’s plans for “Freedom Day” on July 19th. It is clear the desolate situation of COVID-19 in the UK is capping any upside to Sterling and adding to the currency’s woes is the resurgence of Brexit troubles. The Financial Times recently reported that “Brussels and London were on Thursday locked in a dispute over the size of the UK’s Brexit bill, after the EU suggested that Britain would be obliged to pay €47.5B (£40.8B) as part of its post-Brexit arrangements”. This aside, Britain and the EU are still yet to overcome their differences on the Northern Ireland protocol and other trade issues. If these problems persist, it’s likely Sterling will depreciate further.
As investors turned to the US Dollar for safety, naturally Cable fell as a result. GBPUSD opened on Thursday at 1.3792 but was unable to resist downside pressures, closing the session off finally at 1.3760.
GBPEUR also took a drastic tumble yesterday. The pair started the session relatively well, opening at 1.1683. But as the day progressed, GBPEUR kept falling, eventually closing the day just above the 1.16 handle at 1.1609.
EURUSD in contrast was able to make notable gains on Thursday. The pair opened the day at 1.1804 and closed at 1.1852.
Adding to Sterling’s troubles was this morning’s release of UK GDP figures for May. The 3-Month Average was forecasted at 3.9% but came out at 3.6%, and the YoY figure missed expectations by 1.3%, coming in at 24.6%. Construction Output YoY, GDP MoM, Industrial Production YoY and Manufacturing Production YoY also all missed forecasts.