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RationalFX: GBP downward spiral continues

RationalFX: Sterling continued its downward descent against both the euro and dollar on Wednesday trading at fresh lows as investor risk appetite deteriorated as Covid cases continued to rise around the world.

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On a day relatively void of significant market data sterling traded in line with market sentiment which was clearly trading with risk-off. The risk off sentiment follows the spread of the Delta variant of Covid which is now prevalent in more than 100 countries and is now believed to be behind the rapid rise in infections around the world. Of particular concern for investors is recent comments from the World Health Organisation that the increased transmissibility of the variant is likely to result in a substantial increase in Covid cases and place considerable pressure on Healthcare systems which could ultimately force the re-introduction of lockdowns and weigh on economic growth.

According to the latest Covid statistics the U.K. recorded 46,558 cases and 96 deaths it’s highest number of fatalities since March. If the data isn’t concerning enough, the figures show that deaths have almost doubled from the same time last week which saw 50 deaths and 36,660 Covid cases.

Since the start of the pandemic, sterling has traded in line with riskier currencies often trading lower in times of global uncertainty and higher on indications of a global economic recovery. This recent breakout of Covid around the world is clearly a return to uncertainty so it’s no surprise that sterling is facing some selling pressure whilst safe-haven currencies like the USD/JPY/CHF are stronger

Source : ETFWorld.co.uk

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