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Sterling slips on COVID-19 concerns

GBP - British Pound

Its another poor start to the day for the pound as concerns over the spread of the COVID-19 Delta variant force sterling lower. With many countries tightening up restrictions as the COVID-19 situation deteriorates, Boris Johnson has removed virtually all of them despite daily case numbers rising to levels not seen since the worst of the second wave back in January.

Global stock markets have taken a hit over the past week as investors look to park their cash in safe haven assets such as the US dollar, hence the drop in GBP/USD which has fallen from just under 1.39 five days ago to currently around 1.3640. In a press conference yesterday, Johnson turned up the heat on young people who have yet to have a vaccine by saying that from September nightclubs would only be allowed to grant entry to those who were double jabbed, stating a negative test would not be enough to gain access. He also left the door open to enforcing this rule on pubs too in what some in the hospitality sector saw as a way of forcing people to get vaccinated.

GBP/EUR has also tracked lower since the end of last week and currently sits just under 1.16 as the world watches whether Johnson’s plan sees a rush in young adults to get vaccinated and hopefully a significant drop off in cases before schools return in September.

Key Movers

The traditional safe haven currencies continue to prosper from the current market jitters over the Delta variant, with the Swiss franc, Japanese yen and US dollar seeing their value increase as investors pull their cash out of riskier assets such as stocks and commodity linked currencies.

Along with COVID-19 concerns the persistently high level of inflation in the States is also causing concern that the US Federal Reserve's hand may be forced to raise rates sooner than currently expected. The Fed is continuing to reiterate its mantra that the current high level of inflation is transitory and could drop off once the temporary effects of the strong economic rebound dissipate. However the bank may be forced to change its messaging should inflation not start to level off soon.

This morning it seems the rush to the safety of the US dollar is starting to slow and stocks have recouped some of their recent losses seen over recent days. Like sterling, the Australian and New Zealand dollars have taken a hit recently with each dropping over 2% versus USD however also seem to have found some support for the time being. At present, news around the Delta variant is the main talking point with little high impact data scheduled until the European Central Bank’s interest rates decision which is due to be announced Thursday lunchtime. EUR/USD hovers around the 1.18 handle.

Expected Ranges

GBP/USD: 1.36 - 1.3720 ▼

GBP/EUR: 1.1525 - 1.1640 ▼

GBP/AUD: 1.8540 - 1.8695 ▲

GBP/NZD: 1.9680 - 1.9845 ▲

GBP/CAD: 1.7365 - 1.7485 ▼