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Sterling falters as Indian variant cases increase

GBP - British Pound

Sterling sold off across the board yesterday. GBPUSD dropped over 0.5% back towards the $1.41 handle and GBPEUR also dropped over 0.5% to trade back into the mid €1.15s. This move lower can be attributed to concerns around the Indian variant of Covid-19 in the UK causing the government to impose some restrictions on the movement in and out of potential hotspots. Given that the vaccine is effective against this variant you would expect this to have minimal impact on sterling in the long term as the vaccine rollout continues at a fast pace.

Prime Minister Boris Johnson is preparing himself for a barrage of criticism today as his former adviser Dominic Cummings gives evidence to a committee of members of Parliament who are looking into the UK government’s handling of the Covid19 pandemic. If there is heavy criticism of how things were dealt with, we could see a sell-off in sterling.

Key Movers

There was very little volatility in EURUSD yesterday, with the pair trading in a narrow 40 pip range throughout the day.

Yesterday, the European Central Bank (ECB) Governing Council member François Villeroy stated that the ECB would be happy to let inflation run above the 2% mark for some time. The comments didn’t have any significant impact on the Euro, however these comments give us a good understanding of the ECB’s stance on inflation.

For the dollar, all eyes are on tomorrows prelim GDP figures released at 1.30pm (GMT).

Expected Ranges

GBP/USD: 1.4110 - 1.4190 ▼

GBP/EUR: 1.1515 - 1.1595 ▼

GBP/AUD: 1.8130 - 1.8260 ▼