A wave of risk-off sentiment sunk markets yesterday after US and European shares tumbled on increased concerns over the rise in Covid-19 Delta infections threatening the global economic recovery.
The sour mood is likely to dish out more punishment to equity markets as investors seek refuge in safe-haven assets. As reports of outbreaks intensify globally, caution is expected to remain. Although US futures bounced today after the S&P's sharp fall yesterday, the sell-off could resume if investors look beyond corporate earnings to focus on global growth fears.
'Freedom Day' arrives. What next?
All lockdown restrictions were lifted in England yesterday and while this can be seen as a step back into normality, there are concerns over whether this will lead to another government u-turn imposing new lockdown measures across the UK.
The economic recovery remains frail, with the Bank of England expecting unemployment numbers to rise as the furlough scheme comes to an end in September. Surging infections and the uncertainty it presents are the last things the UK economy needs at such a crucial period.
The Pound has depreciated against most G10 currencies this week, notably the Swiss franc and yen. Technically, GBP/USD closed below its 200-day Simple Moving Average yesterday, the path of least resistance remains south, with the following critical level of interest found at 1.3600.