GBP/USD: COVID-19 Adds to UK International Trade Risk

The British pound is down against the US dollar on Monday with forex traders flocking to the safety of the US dollar, even as recent data would suggest the United States economy is not immune to the risks posed by the COVID-19 outbreak. Coronavirus concerns have seen the UK equity benchmark the FTSE 100 lose over 3% on Monday with the Dow Jones projected to lose 2.5% at the open on Wall Street.

GBP/USD was lower by 67 pips (-0.52%) at 1.2897 with a daily price range of 1.2878 to 1.2952 as of 2pm GMT. The currency pair slid in European trading before finding support near 1.29 and above the 3-month lows set last week.

GBP down amid concerns about the coronavirus outbreak

With the UK economy already exposed by its changing trade relationship with Europe, the pound is suffering as concerns grow about how the COVID-19 virus is affecting the flow of goods and services in and out of the United Kingdom. For what its worth, discount fashion chain Primark has said the coronavirus won’t mean it suddenly has empty shelves because it works with multiple clothing manufacturers, including outside of China.

UK parliament returns from a short recess on Monday. The main order of business for Prime Minister Boris Johnson’s government will be the forthcoming trade negotiations with the European Union set to begin in a few days. Confidence about their position seems to be growing in Downing Street thanks in part to the fact that the European Union is yet to finalise its negotiating strategy among the 27 remaining member states.

USD up against most major currencies

As of Monday, the dollar is acting as a haven again, gaining against most major currencies including the Japanese yen, although down against the other traditional havens like the Swiss franc. The dollar’s haven status has been upheld despite shockingly bad PMI data on Friday that saw the United States service sector contract in February for the first time since 2013. The improved data in Europe relative to the United States could start to undermine the dollar’s haven appeal if it persists and the virus has not been contained.

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