The British currency fell against a number of currencies including the US dollar and the euro, as market fears of a new wave of infections have returned. Sterling’s fall follows a rise in infections in the UK, despite the easing of restrictions. The new Delta variant is posing a genuine threat to the globe and world economies and has created concerns regarding global growth. With the pandemic persisting and the new variant being highly transmissible, investors have turned toward safe haven currencies such as the US dollar.
For global economies and the UK in particular, Covid-19 will remain a constant threat that poses an ongoing risk to growth and economic recovery. The currency outlook for the pound and world currencies depends on the pandemic’s trajectory and for how long markets might be potentially affected.
The so-called pingdemic has also hurt the currency as it is causing problems to businesses whose workers have to isolate after being pinged by the NHS app. The NHS app pings someone after they have spent 15 minutes or more in close contact with someone who has tested positive for Covid-19, and they are then advised to self-isolate for 10 days.
According to the Financial Times, businesses have urged the UK government to take control of all the “pingdemic” confusion and to take action to confront the rapid rise in the number of people being told to self-isolate. Unions have called for more support for isolating workers while businesses who want things to go back to pre-pandemic normality want the rules to be relaxed. With numbers of cases increasing and the Covid app potentially “pinging” more people, businesses could be severely impacted. The latest figures from the NHS show that more than 500,000 alerts were sent to the Covid app users in the week to 7 July.
Iceland and Sainsbury’s have reported high numbers of workers isolating, while hundreds of factory staff including those of Nissan’s plant in Sunderland were told to self-isolate. Rolls-Royce stated that the impact was serious and that if more workers were to self-isolate, it could potentially lead the company to halve production.
The Trades Union Congress (TUC) urged ministers to reinforce the compulsory use of masks on public transport and in shops, but masks in England will no longer be compulsory from Monday. The TUC is also calling for statutory sick pay to be increased from just £96.35 per week to the equivalent of the living wage.
In relation to criticisms of the app, Sir Jonathan Montgomery, former chair of the ethics advisory board for the NHS Test and Trace app, said that “We need to think about the consequences of being pinged.” He added: “When the app was designed, we didn’t have the ability to reliable home test, we didn’t have very many people jabbed, and the big worrying thing about this virus is that you can pass it on before you know you have it. So, I wouldn’t be changing the pinging but I would be changing the consequences of being pinged.”
Bank of England: “Too soon to raise interest rates”
If the release of upcoming economic data disappoints, the pound could weaken further. Such risks and the general concerns regarding the pandemic have been highlighted by the Bank’s Monetary Policy Committee (MPC) external member, Jonathan Haskel, who said that it was too early to raise interest rates and end the quantitative easing programme. The rise of the Delta variant means that the Bank will need to continue its monetary support and avoid risks. Haskel said: "The risk of a pre-emptive monetary tightening curtailing the recovery continues to outweigh the risk of a temporary period of above-target inflation. For the foreseeable future, in my view, tight policy isn’t the right policy.” Haskel’s stance might disappoint those who want to see a stronger pound, but it remains to be seen how the pandemic proceeds and how the government handles the rise in infections and demands from both businesses and unions.
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