British Pound Outlook: COVID Mutation, Brexit Talks Undermine GBP/USD


Market sentiment notably soured during Asia-Pacific trade despite an agreement on a much-needed US fiscal aid package, as investors mulled news of a new strain of coronavirus in the UK and the lack of progress in Brexit negotiations.

Australia’s ASX 200 slipped lower, alongside the risk-sensitive AUD, as multiple states implemented border restrictions with New South Wales in light of a fresh Covid-19 outbreak in Greater Sydney. Japan’s Nikkei 225 index fell 0.18% while Hong Kong’s Hang Seng index dropped 0.25%.

In FX markets, the haven-associated US Dollar and Japanese Yen largely outperformed, while GBP plunged lower against its major counterparts. Gold and silver stormed higher as yields on US 10-year Treasuries dipped 2 basis-points to 0.92%.

Looking ahead, the Euro-area’s consumer confidence release for December headlines a rather light economic docket as investors remain intently focused on coronavirus developments.

British Pound Outlook: Covid Mutation, Brexit Talks Undermine GBP/USD

Market reaction chart created using Tradingview


The British Pound kicked-off a fresh week of trade heavily on the back foot, sliding over 1.2% against the US Dollar as Prime Minister Boris Johnson aggressively tightened local restrictions in response to a new strain of the novel coronavirus.

The new mutation is thought to be behind the recent surge of cases in the UK, with a record 35,928 new infections registered on December 20. Health Secretary Matt Hancock warned that this newest strain is “out of control”, adding that “I think it will be very difficult to keep it under control until the vaccine has rolled out”.

Indeed, several ministers have stated that tier 4 restrictions may remain in place until Easter, with the successful vaccination of at least 20 million people required before any easing of measures can even be contemplated.

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