By Yasin Ebrahim
Investing.com – The pound slumped to a nearly two-month low Tuesday as the U.K. government imposed new lockdown measures that could halt the pace of economic recovery as the second wave of Covid-19 gathers pace.
GBP/USD by 0.62% to $1.2734, its lowest since July 27, to test 100-and 200-day moving averages at around the 1.2720 level.
Britain's Prime Minister Boris Johnson warned the country was at a “perilous turning point” and reversed the lifting of some lockdown measures in England.
The warning comes as the UK reported 4,926 new infections, up from 4,368 on Monday.
The new restrictions include a curfew on pubs and a tightening of the 'rule of six,' which limits social gatherings up to a maximum of six people. The measures are likely to remain in place for six months, Johnson suggested.
As well as Covid-19 worries, the pound has been pressured by ongoing concerns about a no-deal Brexit. Johnson's internal markets bill, which undermines parts of the Brexit deal, has soured UK-EU relations.
The bill is not expected to be debated in the House of Lords until after a key summit with EU leaders in mid-October, according to media reports.
The pound had earlier found some reprieve after Bank of England governor Andrew Bailey pushed back against expectations the bank was considering cutting rates below zero. "Yes [negative rates] it’s in the tool bag, but that does not imply anything about the probability of us using negative interest rates at the moment," Bailey said.
The weak start to the week for cable comes in the wake of data suggesting bullish bets on the currency pair is running out of steam.
"The second most sizable move in G10 positioning last week was the erosion of GBP net long positioning with a drop from 7% of open interest to 2%," ING said in a note. "Still, GBP net shorts are nothing but a fraction of what we witnessed in other period where a no-deal outcome appeared as tangible as it is now."