Coronavirus: Pound takes another dip following tighter COVID-19 restrictions

Kumutha Ramanathan
·2-min read
UNITED KINGDOM - 2020/06/06: In this photo illustration The Bank of England twenty pounds (£20) note with the image of Queen Elizabeth II and The British one pound (£1) coin are seen displayed. (Photo Illustration by Karol Serewis/SOPA Images/LightRocket via Getty Images)
'Between Brexit and COVID-19, the pound is facing extreme uncertainty at the moment,' experts say. Photo: Karol Serewis/SOPA Images/LightRocket/Getty Images

The British pound took a further dip on Tuesday following UK prime minister Boris Johnson’s latest announcement of enhanced COVID-19 restrictions.

Johnson announced a string of new curbs on everyday life in England, warning they could last six months as the country struggles to contain rising coronavirus cases.

“We always knew that while we might have driven the virus into retreat, the prospect of a second wave was real and I’m sorry to say that, as in Spain and France and many other countries, we’ve reached a perilous turning point,” he told MPs in parliament on Tuesday.

Watch: What are the new COVID-19 measures announced by the PM?

Sterling was down 0.1% against the dollar (GBPUSD=X) and down 0.03% against the euro (GBPEUR=X) at around 3pm in London. The pound was slightly gaining in early morning trading but lost momentum shortly after the news.

“Between Brexit and COVID-19, the pound is facing extreme uncertainty at the moment, and it's probably only the chance of a surprise happy ending in trade talks that is preventing further rapid downside, as traders remain wary selling the pound while some hope of a deal remains,” said Ranko Berich, head of market analysis at Monex Europe.

READ MORE: Boris Johnson unveils new rules to combat coronavirus second wave

“In this context, the news of renewed restrictions on social interaction and hospitality add at best only marginal pressure to the pound, as most peer economies are facing very similar situations.”

Despite the assessment of the UK’s economic prospects being downbeat, there is hope for the currency.

“Provided that some form of trade deal, no matter how barebones, can be reached, we still see a fairly good outlook for the pound in 2021, particularly against the US dollar,” said Berich.

Watch: What is a no-deal Brexit and what are the potential consequences of it?

One of the key figures in Brexit talks, German MEP David McAllister, told Sky News that he is "deeply concerned" over the state of negotiations. He added that trust and confidence in the British government had been “damaged” following recent disputes.

Achieving a trade deal, he added, would only be possible if the government withdrew its controversial Internal Market Bill.