The pound to euro exchange rate had a couple of good weeks especially after managing to spike over the Easter weekend. Sterling has taken a hit once again after facing a downturn in risk appetite. Despite hitting above the £1.15 handle this week, it has now dropped back down to £1.14.
The ongoing COVID-19 crisis is having an impact on daily life as most citizens in the UK remain in lockdown.
Citizens are only allowed to leave their homes for essential food items and their one hour of daily exercise a day.
UK Currency Strategist from Western Union Business Solutions George Vessey said the GBP had taken a U-turn.
He said: “After hitting a fresh 1-month high of $ 1.2646, GBP/USD took a U-turn nearly bang on the 200-day moving average, which often acts as a magnet before proving a strong level of resistance.
“Consequently, and in line with the risk aversion that swept across markets, GBP/USD fell over two cents yesterday. Is this the top for sterling or just a temporary blip before scaling higher?
“The panic fuelled plunge in the pound last month was tamed by the extensive fiscal and monetary stimulus that helped to calm turbulent markets.
“The recovery since then for sterling has been well received by British importers, alarmed at the rate at which sterling had fallen in such a short space of time.
“The upside appears limited from here though, particularly since lockdown in the UK is expected to be extended, raising fears of a 35 percent fall in GDP this quarter.
“This, combined with lingering Brexit uncertainty regarding a UK-EU trade agreement, could see the pound sold-off amid increasing risk averse conditions.
“The trading range of GBP/USD over the past four weeks has exceeded 13 percent, the pair is down six percent year-to-date but just about in positive territory for the month of April, which it usually ends in the green.”