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London Markets: Sterling slumps nearly 2% on U.K. border closures and lack of Brexit progress

The pound came under intense pressure on Monday as traders woke up to fresh restrictions on travel out of the U.K. and lack of Brexit progress. Read More...

The British pound fell sharply on Monday as traders reacted to news that several European countries and Canada had banned travel from the U.K. due to a faster-spreading strain of coronavirus.

The pound GBPUSD, -2.01% slid 1.3% to $1.3350, while FTSE 100 UKX, -1.15% futures indicated a drop of about 0.8% when markets open. Oil prices CL.1, -3.97% tumbled more than 2% as fresh concerns about the virus weighed.

“Markets have adopted a light at the end of the tunnel approach since Pfizer PFE, -0.92% and Moderna’s MRNA, -2.62% vaccines burst onto the stage. However, the weekend’s events have delivered an unceremonious Monday morning wake-up call that negotiating Q1 of 2021 could be a torturous affair,” said Jeffrey Halley, senior market analyst for Asia Pacific at OANDA, in a note to clients.

U.K. Health Secretary Matt Hancock told Sky News in an interview on Sunday that the new strain, “was out of control,” and the government had to act “quickly and decisively.”

Prime Minister Boris Johnson said Saturday that the mutation of the virus was more than 70% more contagious and believed to be the blame for rapid spread, with much of the southeast of the country and the capital placed into Tier 4 restrictions until at least Dec. 30, with non-essential travel banned.

To stop potential spread of the new strain, European countries over the weekend quickly moved to block any flights from the U.K. That has led to concerns about possible food shortages in the country after France blocked all air, sea and rail traffic from the country for 48 hours.

Read: European countries, Canada ban travel from U.K. amid highly infectious COVID-19 strain

Johnson will reportedly hold an emergency cabinet meeting on Monday to discuss how to deal with potential shortages, with some concerns that even vaccine supplies may not get through, though Whitehall has said it has contingency plans, according to Sky News.

Meanwhile, talks over a post-Brexit trade deal were expected to continue on Monday after the weekend as “significant differences remain”. A deadline of Sunday for a deal, which European Union officials demanded in order to ratify any agreement before the end of the year, came and went. An agreement on fishing rights remains one of the biggest sticking point to talks. The U.K. could end up with no deal headed into 2021.

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