GBP USD Returns to Near Monthly Worst as New Strain of Coronavirus Throttles UK Outlook

The Pound to US Dollar (GBP/USD) exchange rate is plunging this morning, shedding essentially all of last week’s gains. The Pound is being throttled by news that a new faster-spreading coronavirus strain has been discovered in England, causing stricter lockdowns in much of the South-East of the country.

The safe haven US Dollar is becoming a little more appealing amid the latest coronavirus panic. This is helping it to advance against Sterling.

Last Week: Brexit Hopes and Risk-On Ran Out of Steam

For much of last week, the Pound to US Dollar exchange rate advanced. The pair even touched on its best level all year towards the end of the week.

However, the Brexit deal hopes that pushed the Pound higher all week ran out of steam as it became clearer that no deal was reached yet. This meant that time to secure one and avoid a cliff-edge scenario in January is running out.

The safe haven US Dollar was falling for much of the weak due to coronavirus vaccine and fiscal stimulus hopes. However, the risk-on rally weighing on the US Dollar was starting to run out of steam as well.

Three Things to Watch For This Week

  1. Coronavirus Developments

The coronavirus Covid19 has reportedly seen a new strain discovered in Britain. Developments on this strain could further impact the global risk outlook. If concerns worsen, the safe haven US Dollar will be more appealing.

2. Brexit Developments

No UK-EU Brexit deal has been agreed yet. Unless one is reached in the coming days, there is a real risk of the UK seeing a cliff-edge scenario in January.

3. UK and US Growth Rate Results

The latest UK and US growth rate stats will be published tomorrow. These figures are likely to be overshadowed by coronavirus news and politics however.

GBP/USD Outlook

The Pound to US Dollar exchange rate could keep falling if Britain’s coronavirus and Brexit situations only get worse. A worsening coronavirus situation could also keep safe havens like the US Dollar stronger.

Josh Jeffery

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