Coronavirus: Pound takes hit as investors fret over PM Johnson's condition
Market experts say the PM's condition will be reflected in sterling's value as he is treated for COVID-19 in intensive care.
Tuesday 7 April 2020 17:15, UK
The pound has taken a hit against the safe haven dollar on news of Boris Johnson's deterioration as he battles coronavirus in intensive care.
Sterling lost six tenths of a cent against the greenback late on Monday evening when it was confirmed the PM's condition had taken a turn for the worse.
Market analysts warned that the UK currency was likely to be pegged to developments on Mr Johnson's health as Dominic Raab, the foreign secretary, steps up to assume some of his responsibilities.
The pound had been trading at around $1.23 in advance of the Downing Street statement but had recovered most of the ground lost during Asia trading overnight and was almost 1% up on the day when it was revealed, by his official spokesman, that the prime minister was in a stable condition and in good spirits.
Sterling was at $1.2335 just after 5pm UK time on Tuesday.
Stock markets started the week with solid gains in Asia and Europe though the Dow Jones Industrial Average in New York clawed back almost 8% of value lost since markets first took fright from COVID-19 in February.
Tuesday saw a cautious clawback in Asia, despite that lead from New York, while the FTSE 100 built on the previous session's 3% gain and closed up 2.19%.
Analysts saw US indices making further strides at the open on Wall Street and by 5pm UK time, the Dow, S&P 500 and Nasdaq were all up around 2%.
This week's rally has been attributed to signs the COVID-19 crisis could be easing in the worst-hit regions of Europe.
Travel-related stocks - worst hit since the rout in values began in February - saw the biggest gains in London with cruise operator Carnival and easyJet both up 20% though still sharply down on the year to date.
Oil firms also staged a recovery on growing investor hopes of an output cut to boost weak prices being agreed by major producing nations.
:: Listen to the Daily podcast on , , ,
Cineworld was among companies to update on its fortunes - as all its 787 cinemas closed globally.
It suspended the payment of its latest dividend while bosses said they had agreed to defer pay and bonuses.
But market analysts said the pound was a clear focus given Mr Johnson's condition - marking a new front for its fortunes since the collapse in value witnessed since the Brexit vote in 2016.
Chris Scicluna, head of economic research at Daiwa, said: "Clearly the pound has weakened and that reflects the uncertainty and clarity over how much authority Raab will have.
"From an economic point of view there's unlikely to be much change.
"But if and when there are difficult decisions to be made, the lack of guidance at the top could be concerning."
Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo, said: "The currency market has remained fairly calm, but there will be more downside for sterling if Johnson's condition worsens."