Sterling extends losses after new COVID-19 restrictions
- 23 Sep 2020
Sterling is having its worst month in four years and extended its fall against the dollar and euro on Wednesday after new long-lasting coronavirus restrictions in Britain were announced.
Prime Minister Boris Johnson ordered restaurants and bars to close early and told British people to work from home where possible, in new measures which he said could last for six months.
The pound fell on the news, dipping below its 200-day moving average overnight, with losses compounded by a bounceback in the dollar, which has seen cable fall for three days straight.
"This is another negative impacting already grim GBP prospects, which however remain primarily driven by developments in EU-UK negotiations - where we have so far seen very little progress," ING strategists wrote in a note to clients.
The possibility of a no-deal Brexit is also weighing on the pound, although Britain has said it believes a trade deal is still possible.
Johnson is close to getting parliamentary approval for his Internal Market Bill, which angers the European Union by breaking the Withdrawal Agreement struck in January.
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At 07:31 GMT, sterling was at a 2-month low of $1.2695, down 0.3% since New York's close. It has lost 5% so far in September, making this the pound's worst month since 2016.
Versus the euro, it was down around 0.2%, at 92.12 pence per euro, in its fifth consecutive day of losses.
UK PMI data is due at 0830 GMT, and is expected to show a broadly constant pace of recovery. But the data is unlikely to move markets, in light of the new restrictions.
"The hope is that September will continue to see economic activity remain close to the levels seen in August, where "eat out to help out" helped boost the services numbers significantly," wrote Michael Hewson, chief market analyst at CMC Markets UK.
"Of course, after the events of yesterday, and the sudden tightening of restrictions, all of this is rather moot, as well as auguring badly for any type of continuity as we look towards Q4, not to mention what it does for consumer confidence."
Britain's furlough scheme to protect jobs is due to end at the end of October.
MUFG strategist Derek Halpenny said that he expects Britain to soon announce new support measures to reduce the economic impact of the latest restrictions, and that this expectation will help limit the extent of the pound's falls.
Reuters