LONDON (Reuters) - Britain’s pound hit a five-month low against the dollar and traded close to a five-week low against the euro on Tuesday, as broad demand for the safe-haven dollar amid a global surge in coronavirus infections kept investors jittery.
England lifted all COVID-19 social restrictions on Monday, in what local media dubbed “Freedom Day”, although looming over the end to lockdown measures was a surge in infections caused largely by the highly contagious Delta variant of the virus.
COVID-19 restrictions are being implemented again in European countries after recent spikes.
The global tick-up in infections sparked concern among investors at the start of the week, forcing a sell-off in stock markets and a bid for bonds and the dollar, which spurred a sharp move lower in growth-correlated currencies such as the pound.
By 0756 GMT on Tuesday, sterling was 0.2% lower against the dollar at $1.3644, having hit a more than five-month low of $1.3628 in early London deals.
It traded flat on the day against the euro at 86.36 pence.
“Sterling is finally starting to show some under-performance and euro-sterling may well continue to spike - even to the 87.20 pence area,” ING strategists said in a note.
“Driving the under-performance is the sense that the UK government will struggle to ride out the surging case numbers before resorting to fresh lockdowns.”
Initially one of the best performing G10 currencies this year on the back of Britain’s vaccination programme, sterling has given up some gains in recent weeks to a strengthening dollar.
Britain has the seventh highest death toll in the world, at 128,708, and is forecast to soon have more new infections each day than it did at the height of a second wave of the virus earlier this year. On Monday, there were 39,538 new cases.
The country’s Chief Scientific Adviser Patrick Vallance said that 60% of people being admitted to hospital with COVID-19 are unvaccinated, correcting an earlier statement he made on Monday.
Online grocery sales in Britain fell 2.6% in the four weeks to July 11 year-on-year, the first ever fall, as Britons returned to physical stores, workplaces, and restaurants, market researcher Kantar said.
Reporting by Ritvik Carvalho; Editing by Alex Richardson