The British Pound and the Euro have recouped some of the losses incurred early in the week. The two came under pressure as investors sought refuge in the U.S Dollar on Monday as the markets reacted to a fast-spreading coronavirus strain.
New COVID Strain
The Pound fell by as much as 2.5% against the dollar as the U.K inched closer to a total lockdown for much of the country. The sell-off came as traders remained wary of the new coronavirus strain whose transmission is deemed to be out of control. The Euro was also under pressure tanking by as much as 1%.
In response to the new COVID strain, a number of EU countries led by France, Germany, and Belgium imposed bans on all arrivals from the U.K. The Channel Tunnel, through which thousands of trucks pass, remains closed. Concerns over the economic disruptions that the shutdowns would cause on an already suppressed economy fuelled the Pound’s sell-off wave.
The new coronavirus strain is said to be 70% more transmissible than the original strain. The strain is already causing travel chaos and raising prospects of food shortages across the U.K, which is on the cusp of leaving the EU on a hard Brexit.
The dollar, on the other hand, was on a bounce-back mode after weeks under pressure. It climbed against major peers as investors sought refuge in safe-havens amid growing concerns about tightened COVID-19 lockdowns. The bounce back on the dollar comes after sinking to two and a half year low last week. Low liquidity in the currency markets continued to exaggerate dollar gains in other currencies as short-sellers bailed out.
The British Pound has since recovered some of the losses after the European Union hinted it is considering compromise on fishing rights as part of the ongoing Brexit talks. However, it remains on edge as the talk’s progress, with the prospect of a hard Brexit still high. The Euro has also recovered as buyers used the opportunity to ramp up positions after the deep dip.
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