Sterling was under pressure on Monday as rising COVID-19 cases prompted Britain to consider a second national lockdown.
The pound was down 0.3% against the dollar at $1.2876 by 0805 GMT and down 0.15% versus the euro at 0.9182.
British Prime Minister Boris Johnson was pondering a second lockdown with new COVID-19 cases rising by at least 6,000 per day in Britain, hospital admissions doubling every eight days, and the testing system buckling.
The United Kingdom already has the biggest official COVID-19 death toll in Europe at 41,777 people.
“Increasingly widespread speculation about a possible re-introduction of more restrictive measures in London – in sharp contrast with the latest ‘back to work’ encouragement by the government – is just another factor suggesting sterling is one of the least attractive G10 currencies on a risk-reward perspective,” wrote ING analysts in a note.
The prospect of a chaotic end to the Brexit transition period in December if Britain fails to agree a trade deal with the EU also continues to hang over sterling.
“Brexit talks will remain the key driver this week and we see the complacent GBP still facing sizeable downside risk as no-deal is gradually priced back in,” ING added.
– Reuters