Currency
by Charlie Roberts on December 21st, 2020

GBP falls, a new strain of Covid-19 spreads in the UK

UK health authorities have recently reported that a new strain of the virus that causes Covid-19 has been identified in the southeast part of England, UK. Experts are claiming that this strain of the virus is spreading at a much faster pace than the previous one that was in circulation in the country. However, there are no indications that the virus can cause more severe disease.

Although the new strain is not thought to be causing more severe disease, it is causing a lot of trouble in the market. Leading Forex brokers are claiming that one of the major reasons for the current fall GBP is experiencing might be the result of traders panicking.

The movements in the market indicate that the price of GBP/USD decreased by 1.85%, selling at 1.3270 at the moment of writing. In addition to the new strain of the coronavirus, the GBP is also affected by the uncertainty about the Brexit deal. Although the sides have continued discussing the deal, there still is no outcome. The deadline of the talks is in exactly 10 days, if the sides won’t have a deal until December 31, there will be a no-deal scenario.

Price movements of GBP/USD

GBP falls

The candlestick daily chart shown above indicates the price changes of the currency pair GBP/USD over the last few months, starting from August 19 to today. As you can see, after a positive trend of the last few days, the price of the currency pair started dropping.

As we have already said, one of the major reasons for the dramatic change in the recent few days is the new strain of the Covid-19 that was identified in the United Kingdom. According to health experts, the same strain has been identified in a few other countries, including Australia.

The new strain of the virus, although not thought to be causing more severe disease, is spreading a lot faster. This can explain the increase of the daily cases in the country. As of now, the virus is spreading at a very fast pace in the UK, most of the country is under a lockdown and divided into different zones. People from different zones can’t enter other zones.

Because of the new strain of the Covid-19, there are even more travel bans in place. Most of Europe has imposed travel bans on the UK. France went even further than that, imposing a ban on freights, which has caused many problems in terms of the supply chains.

This is especially noticeable because of the holiday season, ahead of Christmas. The travel restrictions were introduced after the decision of the UK to set a whole new, Tier 4 curbs on London and the Southeast, because of the spread of the virus.

Experts are saying that the new strain of the virus is spreading a lot faster than the previous version of it. As some of the health representatives have said, the virus is 70 percent more transmissible than the previous strain. Some people are panicking about the vaccine resistance of the new strain, however, there is no evidence to support these claims. Health professionals are saying that the new strain is simply more transmissible.

In addition to the new strain of the virus, there are other factors influencing the fall of the pound. Many have thought that the UK and EU would have a deal on Sunday, however, another deadline was missed. The sides have confirmed that the talks will continue, however, the hopes of a trade deal is decreasing.

On the other hand, the US has agreed on the new $900 billion plan to support the US economy and help it overcome the coronavirus pandemic problems. In terms of the coronavirus concerns, Britain is at the center of discussions. As we have already said, many countries are limited to travel to the UK. This includes France, Italy, Germany, Austria, and Belgium.

Because of the current restrictions in place, more than 16 million people in the country are required to stay home. The new restrictions were announced by PM Johnson as new efforts to contain the new strain of the coronavirus, which is spreading in the country out of control.

As for Brexit, experts are saying that if a deal is not reached by Christmas, there is a chance that there might not be a deal at all. Experts are saying that if this happens, it could have a significant effect on both, EU and the UK. One of the major problems that can come with no-deal Brexit is that the sides will have to conduct trade according to the rules of the World Trade Organization, which could mean higher tariffs and hardships on exports and imports.

By Charlie Roberts

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