Growing Covid Concerns In UK Dampens Sterling

Sterling struggled to find ground across the board as investors begin to weigh up growing covid concerns in UK. Daily records have continued to be broken, with another 91,743 new cases reported yesterday. Scientific advisors have already called for further restrictions to stem the current outbreak but this recommendation has already been opposed by almost a third of ministers. Yesterday, Johnson went on record to say he reserved the possibility for further restrictions but nothing was being imposed currently. There is growing anticipation, however, that a 2 week circuit breaker, much like the one seen last year, could be announced shortly after Christmas to help prevent the spread of this new variant.

These new concerns have created a lot of uncertainly within the pound. With last week’s interest rate decision all but forgotten it appears the market will now be headline driven and Covid news will once again dominate. With the current situation and lack of positive drivers, it is hard to see much sterling upside in the short term. The market has ultimately started its switch to risk-off conditions. Safe haven flows, namely the USD, CHF and JPY, will benefit the most and as the omicron spreads globally these gains will only increase.