Pound Falls Further As UK Announces Lockdown Lite

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Pound Falls Further As UK Announces Lockdown Lite

Boris Johnson has just announced that the entirety of the UK is now in a kind of ‘lockdown lite’ – he didn’t use the word ‘lockdown’, but the rules are clear: Brits are no longer allowed to leave home except for necessary trips. This is bound to have a ripple effect in the economy, though just how much is difficult to estimate, given the unprecedented nature of the current measures in modern society.

We can already see some reaction to the news, however, as GBP/EUR suffered a modest loss throughout Monday and GBP/AUD fell a further two cents overnight following Johnson’s announcement.

Increased measures are spooking investors; the news ensures that production and GDP in the UK will undoubtedly fall further over the coming month as the country’s workforce is stripped down to only the bare necessities.

Now A Good Time To Buy GBP?

The latest drops come amid a handful of others; the pound fell to $1.15 against USD last week, the lowest level since 1985.

To some investors, this may make GBP an enticing prospect at the moment, particularly considering the global nature of the virus.

While the UK may look to be in a worse position right now in comparison to Australia and the US, the pandemic is growing every week and the international landscape can quickly change; if the US doesn’t take enough measures to suppress the coronavirus, they too could soon find themselves with quickly devaluing the currency.

However…

USD Flourishes In A Crisis

When times are hard, international investors tend to flock to what they know, and the US markets are always seen as the most robust in the world; this is one reason why USD is still doing so well despite widespread criticism of President Trump’s handling of the outbreak.

US Treasuries are the most liquid assets in the world and, while this doesn’t make them invincible, it does mean that if every market is doing equally badly, the US will likely still come out on top.

Brexit Still On The Horizon

Amid the coronavirus crisis, it’s easy to forget that GBP has been struggling for years already due to the uncertainty of Brexit.

While Brexit talks have been put on hold for the moment, potential traders should bear in mind that as soon as the current outbreak is under control, we’re likely to see Brexit continue – and what this will mean for GBP is anyone’s guess.