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Forex Market: GBP/USD hits a fresh three-month trough amid surging global COVID-19 cases as England ends social curbs

GBP/USD plunged to a fresh three-month low on Monday, as jittery mood over England’s re-opening dominated global markets amid continuing spread of the Delta variant of the novel coronavirus, supporting demand for safe haven assets such as the US Dollar and the Japanese Yen.

July 19th marks the end of most social restrictions in England, with PM Johnson’s government betting that fully vaccinated people against COVID-19 are less likely to get seriously ill.

The seven-day average of new daily infections worldwide has exceeded 500,000 for the first time since May. The UK alone reported over 48,100 new cases on Sunday, Brazil – over 34,100 cases, India – over 38,300 cases, France – over 12,500 cases and the United States – over 9,500 cases.

Against a basket of six major peers, the US Dollar was holding in proximity to highs unseen since April 5th on Monday.

“The removal of restrictions means people will catch the virus,” Commonwealth Bank of Australia strategist Carol Kong wrote in an investor note, cited by Reuters.

“A surge in infections could (also) foster an emergence of new variants. If new variants are resistant to existing vaccines and spread to the rest of the world, lockdowns could remain in place for longer and in turn hold back the global economic recovery. All eyes will be on England,” Kong added.

As of 8:10 GMT on Monday GBP/USD was edging down 0.20% to trade at 1.3728, after earlier touching an intraday low at 1.3712. The latter has been the pair’s weakest level since April 13th (1.3694). The major currency pair has retreated 0.73% so far in July, following another 2.66% drop in June.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 10.91 basis points (0.1091%) as of 8:15 GMT on Monday, down from 12.0 basis points on July 16th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.3791
R1 – 1.3827
R2 – 1.3898
R3 – 1.3933
R4 – 1.3969

S1 – 1.3720
S2 – 1.3685
S3 – 1.3614
S4 – 1.3543

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