Pound plunges amid panic over the UK’s mutated Covid strain

The pound was mostly rangebound at the end of last week’s session as the continued impasse in Brexit trade talks stoked fears of a no-deal Brexit.
 
Sterling opens this week in free-fall however amid panic over a new strain of coronavirus. GBP/EUR plummeted to €1.0860 while GBP/USD fell to $1.3280. GBP/CAD tumbled to C$1.7093, while GBP/AUD and GBP/NZD slump to AU$1.7602 and NZ$1.8807 respectively.
 
There looks to be plenty of scope for GBP exchange rates to fall further today as these coronavirus concerns are compounded by Brexit uncertainty.
 
What’s been happening?
 
The pound was subdued at the end of last week’s session amid fading Brexit optimism ahead of the EU’s Sunday deadline.
 
Concerns the UK was headed towards a no-deal Brexit were further stoked by Boris Johnson as he warned that a trade agreement was unlikely unless there was a substantial shift from the EU.
 
The euro was also muted on Friday, with the single currency struggling to garner support in spite of Germany’s IFO business climate index printing above expectations in December.
 
Meanwhile, the US dollar closed last week on a positive note as easing risk appetite saw investors favour the safe-haven currency.
 
What’s coming up?
 
The pound fell as markets reopened after the weekend and looks poised to fall even further as the UK finds itself at the centre of panic over a new, more transmittable strain of the coronavirus.
 
Not only has the emergence of the mutation seen London and other areas of the South-East placed in a new tier four of restrictions but it has also prompted many European countries to ban travel from the UK, with France’s move to ban freight seen as particularly damaging to Sterling.
 
In addition, Brexit uncertainty continues to hang over the pound, as trade talks continue past the EU’s Sunday deadline.
 
The panic over the new Covid strain is likely to bolster demand for the safe-haven US dollar through today’s session, although these gains look to be capped by the likely passing of a $900bn US stimulus package in the coming days.
 
Meanwhile, the publication of the Eurozone’s latest consumer confidence figures will be eyed by EUR investors later this afternoon, with an improvement in household sentiment this month potentially offering some modest support to the euro.