21 Jul 2021
The pound has now declined for the fifth consecutive day against the euro.
So-called risk-on/risk-off patterns (RORO) have dominated the markets recently. Risk-on assets including stocks and commodities dropping as investors are spooked by soaring cases of the Delta variant of coronavirus across the world.
The pound typically falls against 'safe haven' assets, such as the dollar, yen and euro during considerable drawdowns in global markets.
According to Daragh Maher, Head of Research, Americas, for HSBC: "RORO has become increasingly dominant again. For much of the last year, that dominance has been GBP-positive but current fears (however fleeting) are keeping GBP on the back-foot.”
In addition, the pound-to-euro exchange rate (GBP/EUR) edged down to its lowest level since May 10 at 1.1535 on Tuesday, after hitting a high of 1.1758 last week.
"The euro is deemed another safer currency compared to the pound, which is why GBP/EUR has fallen to a 3-month low this week, back under the €1.16 mark. Volatility in this currency pair was anchored near 10-year lows last month, but this wave of risk aversion has injected some life into the pair," stated George Vessey, a Western Union Business Solutions strategist.
Declines over the past five days have hampered the GBP/EUR's uptrend on a technical basis, reports Pound Sterling Live. Investors need to conquer their Delta variant fears before the exchange rate stabilises.1
"The vaccine euphoria - the hopes that the vaccine would end the pandemic and we’d soon be back to normal - is fading," according to Marshall Gittler, Head of Investment Research at BDSwiss Holding Ltd.
"On the contrary, a return to normal could be much further away than people had thought, especially if the problem continues into the winter when people in the northern hemisphere spend more time inside and the virus has more chances to spread," he added.