The Pound weakened yesterday with concerns mounting about the number of coronavirus cases in the UK. Yesterday evening, Prime Minister Johnson announced a third national lockdown which is forecast to slow the UK’s economic recovery from the pandemic. This could lead to the Bank of England easing monetary policy further in order to stimulate the economy which in turn took its toll on the Pound.
The Euro remains supported with German retail sales data exceeding expectations with a release of 1.9% compared to -2.0% that was forecast. French health minister Véran has said that restrictions cannot be eased for the time being as Europe struggles with a slow rollout of vaccinations. In addition, Italy has extended its widened and extended its lockdown restrictions until mid-January.
The Dollar has seen some renewed demand for its safe-haven status after the UK announced another lockdown as well as the possibility that coronavirus vaccines may have to be modified to deal with a new strain from South Africa. Furthermore, FOMC member Mester believes that the US economy will experience a slow-down over the next two months.