British Prime Minister Boris Johnson is making gestures while hosting a virtual press conference inside 10 Downing Street in central London on 19 December 2020.
TOBY MELVILLE | SWIMMING POOL | AFP through Getty Images
The British pound struck on Monday as Britain faces concerns over a new strain of coronavirus, as well as uncertainty stemming from trade negotiations on Brexit.
Over the weekend, the UK said it had identified a new strain of Covid-19 that was spreading faster than previous variants. Following the announcement, other nations said they would temporarily restrict travel to the UK in an effort to prevent the new strain from entering their borders. The British government has already ordered an even stricter Covid blockade in London before Christmas.
As of 11:26 GMT, the pound has fallen more than 2% to $ 1.3236 compared to levels of about $ 1.36 seen last week. Meanwhile, the euro also fell to $ 1.2157, after breaking the $ 1.225 level last week.
Currencies have recently fluctuated around headlines related to trade talks on Brexit. The UK and the European Union remain in a deadlock as the December 31 deadline approaches, with disputes over issues such as fisheries affecting negotiations.
“We’re pretty climbing … to the pound for the next few months.”
Gareth Berry
General Manager and Foreign Exchange and Exchange Strategist, Macquarie Group
Analysts remain bullish
However, analysts told CNBC on Monday that they will remain rising in pounds until 2021, despite headwinds against the currency.
“We should expect some volatility for pounds and what we see this morning reflects that,” Rodrigo Catril, chief currency strategist at National Australia Bank (NAB), told Squawk Box Asia on Monday morning. “.
A Brexit trade deal before the end of the year is “still more likely than not,” Catril said, adding that “it makes sense and politically it will be difficult … to argue that the deal has failed … because ( due to the relatively small size of the industry in the general economic agreement that is being discussed.
Gareth Berry of the Macquarie Group also told CNBC’s “Street Signs Asia” on Monday that he “hopes for a positive resolution” on talks on Brexit by the end of this week.
“This should lead to an agreement with which all parties can live and which can be finally ratified next week by the December 31 deadline,” said Berry, who is general manager and foreign exchange strategist. and installments at Macquarie. “Sterling should like this and that’s one of the reasons we’re pretty climbing … in sterling for the next few months.”
As for the virus, NAB’s Catril said its short-term economic impact is “significant”, although expectations of stimulus and vaccine launch in the coming months encourage markets to “see the positive side in the medium term”.