Growing COVID Concern Hits Forex Market

• Both Pound and Euro Remain Low
• Delta Variant Concern Key to Dip
• Wall Street Looks for Bounce Back

The forex market has certainly not been immune to the change in sentiment which was felt yesterday. This moved across the board wiping value from many major currencies including both the Euro and Pound as concern over the Delta variant of COVID-19 appeared to take hold of the market. Wall Street also tumbled in its worst day of the years though a recovery of sorts is expected today. Treasury yields also rebounded slightly, favoring a stronger US Dollar as the Dollar Index hit a 3-month high. Though today could see something of a reversal, it appears that coronavirus cases will continue to weigh heavily.

Sterling and Euro Both Struggle

On what should have been a day of positivity and strength for the Pound, the self-proclaimed “freedom day” where the majority of the UK  restrictions were rolled back, The day instead saw the Pound toil under the weight of concern in the market and the spiraling caseload that now tops 50,000 per day despite the largely successful, and ongoing vaccination campaign.

At the current mark close to 1.36, the Pound is close to its February low as virus pressures alongside the continuing backdrop of Brexit uneasiness take their toll. The Euro is also being sold though remaining a little more steadfast against the wising Greenback. Still, it dipped below April levels and managed to breach below the key 1.18 mark that it has stayed above for so long.

Delta Variant the Main Worry

It would seem that the sell-off yesterday from those in forex trading came mainly off the back of a resurgence in COVID case numbers, and certainly, in sentiment around the virus and the possibility, it could lead to a renewed shutdown in the economy.

This feeling has undoubtedly been heightened by the fact that there was no major data slated for release yesterday and with traders left with not much to get their teeth into besides German inflation data, the trend has followed momentum more than usual. Sights will be fixed on how the ECB and Fed react to the current change in atmosphere.

Wall Street Looks for Recovery Day

Yesterday was a torrid day for equities. The worst day in more than 8 months was had on Wall Street with all the major indices dropping significant numbers. The Dow Jones was lower by more than 700 points. With that said, many of the hardest-hit stocks were bouncing back in early morning trading, with the futures market pointing upwards.

It speaks to the recent flood into the market that even after such a challenging day, all of these indices remain at or close to record-high levels. Many analysts have also commented that they feel talk of another lockdown to be premature, and we may have seen an overreaction from the market. Whether this continues into today remains to be seen.