British Pound Drops to a Five-Month Low on Freedom Day
- Sterling loses nearly 1% against the US dollar in its worst day since September 10, 2020
- The broad-based sell-off on Monday saw the sterling depreciate across the currency board
British Pound Drops
Britain’s so-called Freedom Day, the day that marked the lifting of almost all Covid-19 restrictions, saw the Great British pound hit its lowest point since February. The sterling turned sour against a basket of currencies on Monday, when the British government officially removed the guardrails that have been serving to protect the nation from catching the coronavirus infection.
In a sharp sell-off in global equities on Monday, riskier currencies, including the pound, received a heavy blow while the safe-haven dollar advanced. Risk-aversion was the dominant theme in what turned out to be the worst day of the year for stocks. The dramatic decline coincided with the UK’s first day of life without mandatory mask-wearing or any social distance guidelines.
The heightened uncertainty brought the British pound to a five-month low against the greenback. The GBP/USD slid to a low of 1.3656, a level last seen on Feb 4. Moreover, the exchange rate broke through the 200-day moving average, a move that has not happened since Sep 25 last year.
The Sterling began depreciating across the board since the start of the European session and bottomed during the American trading hours. Overall, it lost 125 pips, or 0.91%, against the US dollar, its worst one-day performance since Sep 10, 2020.
All Eyes on the Economic Data Report
The GBP/USD pair has been in a downtrend for the last two months. Starting on June 1 when the rate hovered at a high of 1.4250, the sterling has declined nearly 4.20% against its US counterpart.
The EUR/GBP also posted a sharp move yesterday. The euro advanced 0.95% against the pound, posting its strongest day in nearly four months. The EUR/GBP pair jumped to 0.8630, from an opening price of 0.8560. The GBP/CHF and the GBP/JPY also suffered a steep decline, losing 0.95%, and 1.50%, respectively.
Looking ahead into the week, Friday is packed with significant UK economic data that has the potential to create a more volatile environment. The retail sales report and the manufacturing and composite PMI data are set to be reported on Friday.
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