The US Dollar has rallied amid concerns over rising global infections from the Delta variant and growing US inflation levels.

Delta variant case numbers are surging across the UK, Europe and the US, which is creating fear among investors that the global recovery could be hampered again just as many countries start to lift restrictions. In times of trouble, the US dollar is bought as a safe haven currency by investors which has pushed it to multi-month highs this morning.

Today marked so-called “Freedom Day” in the UK, but with new daily case numbers soaring to around 50K and rising sharply, a covid-infected health secretary, and hundreds of thousands having to self-isolate after being pinged, markets are becoming anxious about the risks of an explosion of infections, hospitalisations and deaths which is weighing on the pound.

Sterling has also been hit after BoE member Jonathan Haskel stated today that a tight monetary policy is the right policy for now and that the risks of raising rates too early were worse than a temporary period of high inflation. This contradicted comments from two other BoE members last week, which indicated a lean towards earlier rate hikes, and therefore reduced the appeal of the pound.

As a result, the GBP/USD is down by over 1% from Friday’s high and the rate now sits at 3-mth low. The EUR/USD also hit the lowest levels since April. The GBP/EUR is also down 1% from Friday’s high and trades around a 1-mth low.

Markets will continue to closely watch Covid case numbers, particularly ahead of this Thursdays European Central Bank interest rate meeting. If new case numbers across Europe continue to boom, then the ECB might be forced to take a more dovish tone in their meeting.