European session review: GBP declines as concerns over Covid-19 outbreaks overshadow reopening optimism

GBP weakened against most of its major rivals in the European session on Monday as optimism about the reopening was overshadowed by fears about accelerating coronavirus infections, and investors flocked to safe-haven currencies. The pound fell against USD, JPY, CHF and EUR, but rose against CAD, AUD and NZD.

Britain reported a world-high 48 thousand new coronavirus cases on Sunday, mostly as a result of the more contagious Delta variant. Surges in Covid cases were also recorded across Europe and Asia. Moreover, positive COVID-19 tests were revealed among athletes in the Olympic Village in Tokyo. The UK’s prime minister (PM) Boris Johnson agreed to self-isolate after coming into contact with the infected health secretary.

Despite the spike in infections, England dropped nearly all of the remaining Covid restrictions today, as it was planned in the UK’s government's roadmap.

Investors, however, worry that the UK, as well as other world’s major economies, could impose fresh lockdowns to contain the spread of the virus that could hurt the global recovery. 

Market participants also digested the remarks of the BoE’s Monetary Policy Committee (MPC) member Jonathan Haskel, who said that he did not think that tight policy is the right option for now. He also added that in his view “the risk of a pre-emptive monetary tightening curtailing the recovery continues to outweigh the risk of a temporary period of above-target inflation”.