GBP/USD: New COVID Strain Bans Sterling From Surging, Boris’ Actions, Brexit Eyed

A dry-run for Brexit? British supply chains are distressed by a sweep of flight bans to and from the UK – and especially by the freight shuttering imposed by France. European and non-European countries have acted rapidly – and arguably with panic – to prevent the spread of the new coronavirus strain.

The VIU-202012/01 variant is responsible for the quick spread of the disease in London and Southeast England, causing Prime Minister Boris Johnson to announce new restrictions of the are – Tier 4, a new level created over the weekend. In a special Saturday address to the nation, Johnson said that the mutation is 70% more transmissible and raises the Reproduction rate (R) by around 0.4%.

However, there is no evidence that this mutation – which is normal with viruses – is more lethal nor vaccine-resistant. Health Secretary Matt Hancock, which announced the news about the variant early last week in parliament, added to the gloomy mood by saying on Sunday that it is “out of control.”

It is also essential to note that Britain is well ahead of other countries in genetic sequencing. The UK already noted that a spread in the summer originated in Spain and that Danish minks are responsible for another break in the autumn. The variant is likely spread across the world – without it being tracked.

Following the potential strain on British supply chains – just before Christmas, the PM convenes his Cobra cabinet used for emergency situations. Will he announce special measures to alleviate the pressure on British ports? Will other areas of the country enter severe lockdown levels?

The PM’s decisions could go both ways for the pound. 

The virus news took over Brexit headlines, which had been dominant in shaping sterling trading for long weeks. With ten days to go until the transition period expires, there is still no white smoke coming out of the negotiation rooms.

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