Sterling dipped by nearly two cents against the US dollar to close to $1.33 in early trading on Monday, 21 December and was also down by nearly a cent against the euro to just above €1.09.
The UK currency had already been experiencing volatile trading recently with hopes of a Brexit deal driving it to the highest level since 2018 against the US dollar last week.
But the imposition of tough new restrictions across parts of Britain to curb a worrying upturn in COVID-19 case numbers, and fears about the emergence of a new strain of the virus, spooked neighbouring countries and markets.
Jeffrey Halley, a senior market analyst at Oanda said: “Brexit trade deal talks remain stalled over the weekend, with time running out to approve a deal through by both sides before 31 December.
“Combined with European border closures and the UK health secretary using phrases such as ‘out of control’ to describe the new strain, sterling is unsurprisingly under pressure today.
Prime Minister Boris Johnson is to chair an emergency response meeting on later today to discuss the virus situation, with fears that a French ban on freight from the UK could result in food shortages with just a few days to go before Christmas.