“Delta” variant and economic concerns weigh on the forex market

Vrasidas Neofytou
Head of Investment Research

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Growing concerns about the fast-spreading “Delta” variant and inflation fears have been dominating the forex market since the start of July.

Forex investors have been reassessing their bets since the spread of the highly infectious variant across the world has fuelled worries about a slowdown in global economic recovery.

Currencies tied to the economic comeback such as Euro and Pound Sterling and the commodity-exposed Australian and Canadian dollar have weighed on the risk-off mood.

A surge in “Delta” variant cases in Britain and the Eurozone has deteriorated the post-pandemic economic outlook, sending the Pound Sterling and the Euro to multi-month lows against major currencies.

The Aussie has dropped to a seven-month low as a spike in Covid cases in Sydney raised the prospects of an extended lockdown together with falling industrial metal prices.

The Canadian and New Zealand dollar have lost some ground against major peers, as the resumption of social restriction measures to curb the spread of the virus, will hit demand for commodities in the near term.

Meanwhile, the general risk aversion sentiment had supported the safe-haven currencies of the US dollar, Japanese Yen and Swiss Franc.

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