Pound hovers near two-month low as UK unveils coronavirus second wave fears

Lianna Brinded
·Head of Yahoo Finance UK
·3 min read
Photo: Getty
The pound fell by over 0.3% to $1.26 in early trading and remains choppy as investors navigate the likelihood of a stricter lockdown. Photo: Getty

The pound sank against the US dollar (GBPUSD=X) in the early hours of trading on Wednesday, following UK prime minister Boris Johnson’s address to the nation.

On Tuesday, Johnson revealed that the government was imposing a new set of rules on England to help battle the spread of COVID-19 across the country, which has got scientists worried about a rapid increase of cases in the winter months.

The new measures are:

  • Working from home: After telling people to get back to the office, the government now says that if you can work from home, you should avoid going into the workplace. It said that for jobs where it’s not possible, like construction and retail, then people should go into work but employers should adhere to health and safety protocols to make it as safe as possible.

  • New closing time and rules for pubs, bars and restaurants: There is now a strict closure time of 10pm local time. These establishments will also be restricted to table service only and bar staff and non-seated customers, shop workers and waiters will be obligated to wear face masks.

  • Reduction in wedding guests: Guest numbers are reduced to 15 from 30.

  • Sporting events paused: Due to the nature of sporting events drawing large crowds, fans returning to sporting events are paused until further notice.

  • "Rule of six:” Now applies to indoor team sports.

  • Fines increased: The level of fines has ramped up. It is £200 for the first offence and up to £10,000 for repeat offenders.

Johnson later addressed the nation in a televised speech and said that “tougher measures” were on the horizon if people did not follow the latest restrictions. He also warned that stricter rules could be enforced over the period of six months if the reproduction number (R) number — the average number of secondary infections produced by a single infected person — did not fall below 1.

The R number is currently between 1.1 and 1.4. The number of UK cases rose by 4,926 on Tuesday and deaths rose by 37. The UK chief science adviser and England’s chief medical officer warned on Monday that while these numbers seemed low compared to the onset of the rapid spread of the pandemic earlier this year, if the virus is not controlled in its spread, then the doubling on cases could be fatal when it comes up to winter months where flu season starts.

The pound fell by over 0.3% to $1.26 in early trading and remains choppy as investors navigate the likelihood of a stricter lockdown over the next month or so, if the R number does not fall.

Chart: Yahoo Finance
Chart: Yahoo Finance

Neil Wilson, analyst at markets.com said: “GBPUSD traded under 1.27 in early European trade after the downside breach of the 200-day EMA presented bears with an obvious momentum play.

“Yesterday’s move under the 1.2760 level has opened up the path to further losses and today the pair is trading through the 100-day line and testing the 38.,2% retracement at 1.2690.

“Whilst Andrew Bailey attempted some push back on negative rates, saying they are not imminent, the takeaway from his comments was that this unorthodox and dangerous tool is very much being actively considered by the bank’s Monetary Policy Committee.”

GBP/USD downside exposed. Chart: markets.com
GBP/USD downside exposed. Chart: markets.com