Sterling has started the morning on the back foot as new national lockdown measures are implemented across the UK. After noting that hospitals were under “more pressure from COVID than at any time since the start of the pandemic”, and that the coming weeks will be the “hardest yet”, Boris Johnson has ordered the public to “stay indoors other than for limited exceptions - such as essential medical needs, food shopping, exercise and work that cannot be done at home - and said schools and colleges should move to remote teaching for the majority of students until at least half term”. This comes after the UK recorded 58,784 positive cases on Monday, as well a further 407 deaths (within 28 days of a positive test).
GBPUSD felt the strain of the new lockdown measures, dropping from 1.36 to 1.35 in the session. The pair opened Monday at 1.3682 and closed nearly a percent below at 1.3549.
It was a similar situation for GBPEUR – the pair fell from the 1.11 handle into the 1.10’s. The pair opened the week strong at 1.1147, but was unable to maintain its position, and closed at 1.1057.
EURUSD also saw some minor losses before yesterdays close. The pair opened at 1.2273 and closed just below that mark at 1.2253.
As the COVID-19 situation in England worsens, worries about the decline and future of the British economy is capping Sterling’s gains. The impact to economic growth by shutting down most of the country will likely be devastating, and the Bank of England in response may have to cut interest rates as soon as their February meeting in an attempt to provide additional support to the economy. With the current rate set at 0.10% - a move into negative territory will likely see Sterling decline.
On the data front, a quiet calendar today; starting off we have the German Unemployment Change for December, forecasted at 10K with a previous of -40K. Then in the afternoon we have the ISM Manufacturing PMI from the US, followed by speeches from Fed members Evans and Williams.