Sterling edged lower against the dollar on Monday with British Prime Minister Boris Johnson expected to announce new restrictions as the COVID-19 outbreak accelerates, but hopes for a Brexit deal kept the currency above the key $1.30 level.
Johnson will hold a meeting of the government’s emergency COBRA committee and then address parliament. His three-tiered local lockdowns will include shutting bars, gyms, casinos and bookmakers in some areas placed onto the “very high” alert level, probably across the north of England, British media reported.
New lockdowns will add pressure to the economy, which grew at the slowest pace in August since it began to recover in May from its record slump, but analysts said markets have turned more optimistic about Brexit negotiations.
“Investors do, however, seem more relaxed about Brexit risk and it looks like Downing Street will try to find ways to soften this week’s Oct. 15 deadline (set by Johnson for a deal),” ING wrote in a note to clients.
Sterling was down 0.2% at $1.3022 at 0838 GMT, not far from the one-month high it touched on Friday. Versus the euro, it was down 0.1% at 90.73 pence.
In the meantime, the Bank of England asked banks on Monday how ready they are for zero or negative interest rates, following up its announcement last month that it was considering how to take rates below zero if necessary.
Britain recorded 12,872 new daily cases of COVID-19 on Sunday, a fall from the 15,166 cases reported the day before, government data showed.