Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

Pound Falls as Confusion on Lifting Lockdown Adds to Uncertainty

Published 11/05/2020, 15:36
Updated 11/05/2020, 15:54

(Bloomberg) --

The pound was already weighed down by concern over trade talks between the U.K. and Europe and the economic fallout of the virus when Prime Minister Boris Johnson added one more reason to be uneasy.

The pound weakened as much as 1% against the dollar, the most in three weeks, after Johnson’s public address on Sunday about his government’s plan to ease the nationwide lockdown lacked clarity. The prime minister is currently speaking in the House of Commons about the plan.

It comes just as the U.K. and the European Union begin negotiations over trade issues, the most pressing of which are unlikely to be resolved, officials with knowledge of matter said about two weeks ago.

That’s adding to the anxiety investors feel over the prospects of a messy divorce, and explains why, together with the multitude of factors weighing on the pound, the increase in the currency’s one-month implied volatility in May is among the biggest in the world.

“Investors are concerned about the lack of progress in the post-Brexit talks between the U.K. and the EU and about widespread criticism that the government’s response to the coronavirus crisis was slow and, latterly, that it is vague,” said Jane Foley, senior foreign currency strategist at Rabobank.

A Cruel Month

The pound’s risks are piling up in a month that has historically proved bleak for the currency. Sterling has fallen every May over the past decade, and all but four times since 2000.

Worse still for global currencies is the preference for the greenback as the world’s safe haven currency of choice. Bloomberg’s dollar index advanced 0.4%, bouncing off its 55-day moving average.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

“Lower risk sentiment, lower pound,” said Jordan Rochester, a Group-of-10 foreign-exchange strategist at Nomura International. “It remains a global pandemic.”

The currency dropped 0.6% to $1.2339 as of 3:33 p.m. in London, and weakened 0.4% against the euro.

©2020 Bloomberg L.P.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.