Forex Market: GBP/USD hits a one-week low as coronavirus resurgence in Britain adds to prospects of a second national lockdown

GBP/USD extended last Friday’s losses on Monday, while touching a one-week low, as a spike in new confirmed coronavirus cases in Britain urged authorities to consider another round of lockdown restrictions.

New infections in the country have risen at a daily rate of at least 6,000, while hospital admissions have doubled every eight days.

“Increasingly widespread speculation about a possible re-introduction of more restrictive measures in London – in sharp contrast with the latest ‘back to work’ encouragement by the government – is just another factor suggesting sterling is one of the least attractive G10 currencies on a risk-reward perspective,” ING analysts wrote in an investor note.

Additionally, Brexit negotiations “will remain the key driver this week and we see the complacent GBP still facing sizeable downside risk as no-deal is gradually priced back in.”

Meanwhile, investor focus now sets on a plethora of speeches by Federal Reserve officials this week for further clues on the central bank’s policy framework shift.

Federal Reserve Chair Jerome Powell is expected to testify with US Treasury Secretary Steven Mnuchin before the House Financial Services Committee on Tuesday, followed by a testimony before the House of Representatives’ Select Subcommittee on the Coronavirus Crisis on Wednesday and a testimony before the Senate Banking Committee on Thursday.

As of 10:12 GMT on Monday GBP/USD was losing 0.54% to trade at 1.2843, after earlier touching an intraday low of 1.2835, or a level not seen since September 15th (1.2815). The major pair has retreated 3.89% so far in September, following three successive months of gains.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 26.6 basis points (0.266%) as of 10:15 GMT on Monday, or unchanged compared to September 18th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.2942
R1 – 1.2971
R2 – 1.3029
R3 – 1.3058
R4 – 1.3087

S1 – 1.2884
S2 – 1.2855
S3 – 1.2797
S4 – 1.2739