GBP/USD: Second Shot At 1.37? Not So Fast, As Troubles Are Piling On The Pound

5 pieces of banknotes on yellow and white textile

  • GBP/USD has been retreating from 1.37 as the dollar benefits from covid, stimulus concerns. 
  • Brexit issues, fears about delaying the second dose, and Scotland’s independence push weigh on the pound.
  • Monday’s four-hour chart is showing bulls are losing ground.

How urgent is the second COVID-19 vaccine shot? The UK’s controversial delay of the second jab is only one issue weighing on sterling.

Evidence coming from Israel, the world’s leader in vaccination, suggests that a high level of defense against the disease is achieved only after the booster jab. Will reaching more people with a lower immunization level be sufficient? Time will tell, but doubts are already taking their toll on sterling.

Source: OurWorldInData

Another issue is Brexit. Investors mostly forgot about the saga after the EU and the UK reached an agreement on Christmas Eve – but the friction is becoming apparent in recent days. Officials at the Department for International Trade advised exporters to set up shop in Europe to avoid border issues. Opening separate companies in the bloc would allow them to circumvent paperwork and taxes resulting from the exit.

The third weight on the pound comes from the north – Scotland is pushing for another independence referendum. Support for a poll and for leaving have risen with Brexit and they cause another headache for Prime Minister Boris Johnson.

All these gloomy headlines – coming one week after Blue Monday – all add to fresh gains for the dollar. The greenback is catching a bid amid concerns about the new variants of coronavirus and also uncertainty about President Joe Biden’s stimulus plan.

While the British covid strain succumbs to vaccines, there are signs that it is more lethal than the normal type of the virus. Concerns about the South African and Brasilian versions are greater – with some fearing they are resistant to the jabs.

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