Pound Dips On New Virus Strain, Post-Brexit Deal Worries
The pound drifted lower against its key counterparts in the European session on Monday, as the outbreak of a new strain of the coronavirus in the country forced the authorities to impose tighter restrictions and the UK and the EU still failed to resolve conflicts on key issues in order to agree on a trade deal before the end of the year.
The British government on Saturday imposed tighter restrictions on London and south-east England, warning that the new strain of the virus was “out of control”.
European countries have imposed travel bans on the U.K., while other countries are expected to follow suit.
David McAllister, Chairman of the European Parliament’s Foreign Affairs Committee, said that it will not grant consent to an agreement this year as the Sunday deadline was missed over the weekend.
The negotiations remained deadlocked due to an impasse over the fisheries and level playing field between the two sides.
Investors are concerned over securing a deal before December 31 deadline, when the UK will leave the single market and customs union.
The pound depreciated to a 10-day low of 1.3215 against the greenback, versus Friday’s trading close of 1.3521. The pound is seen finding support around the 1.31 level.
After touching a 6-day high of 139.00 in the previous session, the pound weakened to a 10-day low of 137.03 against the Japanese yen. Next key support for the pound is possibly seen around the 136.00 level.
The pound was down against the franc, at a 10-day low of 1.1734. This followed a 6-day high of 1.1893 set at the beginning of the Asian session. Further fall is likely to take the pound to a support around the 1.16 level.
The U.K. currency reached a 10-day low of 0.9217 versus the euro, falling from a 6-day high of 0.9095 registered at 5:30 pm ET. Should the pound slides further, 0.93 is likely seen as its next support level.
Looking ahead, Canada new housing price index for November is due in the New York session.
Eurozone flash consumer sentiment index for December is set for release at 10:00 am ET.