British Prime Minister Boris Johnson gestures as he hosts a virtual press conference at 10 Downing Street in central London on December 19, 2020.
TOBY MELVILLE | POOL | AFP via Getty Images
The British pound took a beating on Monday as the UK faces concerns about a new coronavirus strain and uncertainty arising from the Brexit trade deal negotiations.
Last weekend, the UK said it had identified a new strain of Covid-19 that is spreading faster than previous variants. Following that announcement, other countries said they would temporarily limit travel from the UK to prevent the new species from entering their borders. The British government has already ordered an even tougher Covid lockdown in London ahead of Christmas.
As of 11:26 GMT, the British pound is down more than 2% to $ 1.3236, from levels around $ 1.36 last week. Meanwhile, the euro also fell towards $ 1.2157 after crossing the $ 1,225 level last week.
Currencies have been fluctuating around the headlines recently in connection with the Brexit trade talks. Britain and the European Union are still deadlocked as a December 31 deadline looms, with disputes over issues like fisheries plaguing the negotiations.
“We are quite optimistic … about sterling for the coming months.”
Gareth Berry
Managing director and foreign exchange and exchange strategist, Macquarie Group
Analysts remain optimistic
Still, analysts told CNBC on Monday that despite the currency’s headwinds, they will remain bullish for the pound in 2021.
“We can expect some volatility for the pound and what we see this morning reflects that,” Rodrigo Catril, senior currency strategist at National Australia Bank (NAB), told CNBC’s “Squawk Box Asia” Monday morning.
A Brexit trade deal before the end of the year is “even more likely than not,” said Catril, adding that “it makes sense and will be politically difficult … to claim the deal has failed … because of … fishing) “because of the relatively small size of the industry in the overall economic deal being discussed.
Macquarie Group’s Gareth Berry also told CNBC’s “Street Signs Asia” on Monday that he was “hoping for a positive resolution” on the Brexit talks by the end of this week.
“That should lead to a deal that all parties can live with and eventually ratify the next week in time for the December 31 deadline,” said Berry, who is managing director and foreign exchange and exchange strategist at Macquarie. “Sterling should love that, and that’s one of the reasons we’re pretty optimistic … about sterling for the coming months.”
On the virus, NAB’s Catril said the short-term economic impact is “significant”, although expectations of stimulus measures and the introduction of vaccines in the coming months encourage markets to “see the bright side in the medium term” .