Pound US Dollar Exchange Rate Tumbles as Markets Spooked by European Coronavirus Restrictions

GBP/USD Exchange Rate Dented by Coronavirus Concerns

The Pound Sterling to US Dollar (GBP/USD) exchange rate is on the back foot this morning, as coronavirus concerns drives flows into safe-haven assets.

At the time of writing the GBP/USD exchange rate is trading at around $1.2958, down roughly 0.4% from this morning’s opening levels.

US Dollar (USD) Buoyed by Coronavirus Concerns

The US Dollar (USD) is trending higher this morning as weakening risk appetite sees investors favour the safe-haven currency.

The souring of market sentiment has been attributed to second wave fears, with investors particularly unnerved by the situation in Europe, where surging cases have forced many countries to impose stricter restrictions, such as France’s new curfew in Paris.

Connor Campbell, financial analyst at Spreadex, comments:

‘The headline announcement was the imposition of a 9pm to 6am curfew in Paris, and 8 other French cities, that will be in place for at least six weeks.

‘In Germany – which just saw its own record daily case increase – the new restrictions were less severe, but still include limits on the number of people at private gatherings, and curfews on bars and restaurants in the worst hit areas.’

These concerns have also prompted a sell-off in equity markets this morning, further buoying the appeal of the safe-haven US Dollar.

Pound (GBP) Undermined as London to Move to Tier Two Restrictions

At the same time, the Pound (GBP) finds itself on the back foot this morning, following the announcement that London will be moving from tier 1 to tier 2 coronavirus restrictions from this weekend.

The move will place a ban on households from mixing and could negatively impact economic activity in the capital.

Mayor of London Sadiq Khan said:

‘Nobody wants to see more restrictions but this is deemed to be necessary in order to protect Londoners.’

In addition, reports suggest that Greater Manchester and Lancashire are likely to join Liverpool City Region in Tier 3.

GBP investors are growing increasingly concerned about how the new restrictions could impact the UK’s economic recovery, particularly as calls for a short ‘circuit-breaker’ lockdown continue to grow.

GBP/USD Exchange Rate Forecast: US Jobless Claims in Focus this Afternoon

Looking ahead, the Pound to US Dollar (GBP/USD) exchange rate could face additional pressure later in the day, following the publication of the latest US jobless claims.

This afternoon’s figures are forecast to report that initial jobless claims remained just above 800,000 last week.

With claims having held around this level for some time now, concerns over a stalling of the US labour market could further rattle investors and prompt additional safe-haven flows into the US dollar.

Meanwhile, the direction of the Pound will be tried to outcome of the EU summit, with any optimism from leaders on the chances of a post-Brexit trade deal potentially boosting GBP exchange rates.

Matthew Andrews

Contact Matthew Andrews