LONDON, December 20, Reuters - The British pound fell to a three-day low on Monday, struggling to hold above $1.32 against the dollar as a risk-off mood swept through financial markets and as pressure grew on policymakers to slow the spread of the Omicron coronavirus variant.
Britain has reported record levels of COVID 19 cases, with officials warning that the full effects of the latest wave are yet to be seen. Boris Johnson, the prime minister, held a meeting with senior ministers to discuss the situation.
The meeting came in the wake of growing public anger over reports of government officials holding gatherings and parties in Britain when Britain was under lock down last year, raising doubts about Johnson's authority within his Conservative Party.
Brad Bechtel, global head of FX at Jefferies LLC, said the government of Boris Johnson's government is a mess with a series of issues and by-election loss recently, coupled with resignations and COVID related restrictions in the short term.
The pound was 0.1% lower against the dollar, at $1.3224. The pound fell 0.6% against a reversal of the euro, to 85.43 pence.
The pound has erased all its gains because of the Bank of England unexpectedly raising interest rates last week, as it hasn't kept pace with its current levels.
NAB strategists said that the support from the blindsided BoE action in raising rates was only temporary with focus on Omicron and government disarray.
When asked whether or not the government would impose further restrictions before Christmas, Deputy Prime Minister Dominic Raab said he could not make any guarantees.
The latest positioning data shows that investors have been very bearish on the British currency with short pound bets at their highest levels since October 2019.