Market report: Indian variant could impact pound
Sterling retracted from recent high against the euro and dollar on Thursday as market sentiment shifted from risk-on to risk-off.
The adjustment follows a good spell for sterling, which has been the week’s strongest performing currency. Market relief over the Scottish election, further easing of lockdown restrictions and the Bank of England raising its growth forecasts had all made sterling an attractive bet.
Since then market sentiment has shifted with issues abroad causing investors to revert back to safe haven positions. In particular, rising tensions between Israel and Palestine. Whilst a stronger than expected inflation reading in the US has boosted demand for the dollar over risk sensitive currencies like sterling.
News of an Indian Covid variant spreading within the UK is also likely to have contributed. Health officials have upgraded the Indian Covid variants from “under investigation” to a “variant of concern”, following a reported 1,313 cases in the UK, up from 520 last week.
This has likely caused investors discomfort as if the variant isn’t contained the final easing of lockdown restrictions in June could be under threat. Especially after a Sage member admitted to reporters that step three of easing restrictions will continue on Monday, but a delay to easing restrictions fully on the 21st June may be “possible”.
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