MUFG Research discusses the reasons behind GBP weakness during the past trading sessions this week.
"The main trigger for the correction lower has been the release of further details about the new strain of COVID that has been detected in England. Pound weakness overnight also partly reflects some disappointment that the EU and UK have again failed to make a breakthrough in Brexit trade talks over the weekend.
The negative developments clearly have increased downside risks for the UK economy and the pound, and will dampen the scope for any gains on the back of a Brexit trade deal before year end, MUFG notes.
"The price of crude oil has already fallen sharply by around 3.5% overnight in anticipation of the potential negative hit to global growth as well. It provides some much needed relief for the US dollar following the recent heavy sell off," MUFG adds.