The pound fell today, extending its losses on a combination of dollar strength and weak domestic factors - the long-term damage to Britain's economy from the coronavirus and a lack of progress in Brexit negotiations.
The Bank of England's deputy governor, Dave Ramsden, said yesterday that the level of British economic output would permanently be about 1.5 percentage points lower than it would be had it not been for the pandemic.
The European Union's chief Brexit negotiator, meanwhile, said that Britain had not changed its position on key sticking points in Brexit trade talks and that he was "worried and disappointed".
"Over the past few days Sterling was able to benefit from a EUR and USD weakness. At the same time investors seem to be ignoring idiosyncratic factors," wrote Commerzbank FX strategist Thu Lan Nguyen.
"Things are still not looking great as far as Brexit is concerned," she said, referring specifically to comments by BoE governor Andrew Bailey about a lack of progress on the issue of equivalence for the financial services sector.
"Following four years of Brexit drama the market seems immune to this. However, GBP investors will be unable to ignore the Brexit risk forever," Nguyen said.
Sterling was at $1.3277 this morning, down 0.5% since the previous session's New York close, while against the euro it was down around 0.2% at 0.88985.
After the euro hit $1.20 earlier this week, it has retreated as the market grew concerned that euro strength was a problem for the European Central Bank.
Britain's economy shrank by more than 20% in the April-June period, worse than any other big industrialised nation.
More than one-in-10 British shops stand empty.
On the possibility of a negative interest rate, speculation about which has previously hurt the pound, Bank of England Governor Andrew Bailey said that it is in the bank's box of tools but that he is not planning to use it soon.
