GBP/USD tumbles to $1.28 amid fresh coronavirus sell-off

The US dollar was back in the driving seat yesterday, with investors favouring the safe-haven currency as coronavirus concerns weighed heavily on market sentiment.

Meanwhile, the pound is rangebound in trade this morning, with GBP/EUR muted at €1.0881 and GBP/USD subdued at $1.2781. GBP/CAD is flat at C$1.7021, while GBP/AUD and GBP/NZD hold steady at AU$1.7748 and NZ$1.9193, respectively.

Looking ahead, the main focuses for currency markets today will be Federal Reserve Chair Jerome Powell’s testimony in front of Congress, and the likely announcement of new coronavirus restrictions in the UK.

What’s been happening?

Investors flocked to the US dollar through yesterday’s trading session as investors sought safe-havens amidst a sharp sell-off in equity markets and a wider risk-off tone.

This sell-off was linked to the recent spike in global coronavirus cases, with the threat of new lockdown restrictions in Europe and elsewhere curtailing a nascent global economic recovery, unnerving many investors.

Unsurprisingly, these concerns over Europe’s coronavirus resurgence and expectation for fresh restrictions weighed on the euro on Monday. Additionally, further pressure came from European Central Bank (ECB) President Christine Lagarde as she acknowledged the bank is monitoring the appreciation of EUR exchange rates.

In the UK, speculation of new coronavirus restrictions also took a toll on the pound at the start of the week.

In a televised address to the nation, the government's chief scientific and chief medical advisers painted a bleak picture if more stringent action is not taken, stoking expectations of stricter restrictions potentially disrupting the UK’s economic recovery.

What’s coming up?

Turning to today’s session, the spotlight looks to be on Jerome Powell’s testimony in front of Congress.

The Federal Reserve Chair is expected to be grilled on the recent changes to the bank’s average inflation target as well as its outlook for the US economy and the risks posed by a coronavirus resurgence.

In the UK, all eyes will be on Boris Johnson’s appearance in the House of Commons, in which the Prime Minster is expected to announce new coronavirus restrictions, with the pound poised to fall in response.

Finally, EUR investors will be focused on the Eurozone’s latest consumer confidence index as a deterioration of household sentiment this month is likely to weaken the euro.