Covid cases dictating strength of major currencies

By Paul Newfield

Recently, the three major currencies of the GBP, EUR and USD have seen much volatility. The highs of the pound last week were completely eroded by midweek concerns over the continued impact of the delta variant of Covid.

Yesterday saw sterling claw back almost all the losses incurred earlier on Wednesday, appearing as if it is now the turn of the single currency to bear the weight of covid cases and the impact it has. The “triple threat” of general covid concern (partly the beta variant in France – the very same that caused Britain to maintain quarantine for those travelling back from our cousins across the Channel) , pre-emptive concerns over the outcome of the ECB’s interest rate and monetary policy decisions (they needn’t have worried; figures came in unchanged from the previous) and a fall of consumer confidence, co-conspired to significantly weaken the euro and has made buying the currency significantly more cost effective, particularly for those of you with enough in hand to consider buying your very own property abroad.

How long this will last is anybody’s guess, even with UK retail sales coming in slightly above expectation this morning, as all three majors have MARKIT services, MARKIT PMI inflation and MARKIT manufacturing figures out today; what is known is that the pound has rarely been much higher against the continental currency, with continued negative or zero interest rates, being kept in place across Europe trying to stimulate inflation to around the magic 2% figure that the UK and US, as well as Europe, are aiming for although there are reports of divisions in the ECB against keeping rates so low. The US needn’t worry, they have the highest inflation levels (around 6%) since the last time the world was financially going so swimmingly…2007-2008 if this writer recalls correctly.


 Brexit negotiations are still going on, yes, still. Despite the previous deal agreed with Brussels over Northern Ireland, being framed as “brilliant” by Mr. Johnson, it appears he is now taking a stance of disowning it completely. Quite the U-turn, but we should all be used to this by now. It is for this reason that not only are the EU now even more negatively swayed as far as Blighty is concerned but it has cost Northern Ireland access to up to two thousand medicines, making for some very worried healthcare providers and patients over the water. It seems between BoJo and Frost things still aren’t going to plan and to paraphrase another classic comedy duo “that’s another fine mess you’ve gotten us in to”.