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London - The pound fell to its weakest level in six weeks after data released on Friday showed Britain’s key services sector expanded the least in five months in February, a sign that overall economic growth may falter this quarter.
Sterling fell to levels last seen on January 17, the day Prime Minister Theresa May signaled her plan for the UK’s exit from the European Union would prioritize regaining control of laws and immigration at the cost of losing access to the single market.
IHS Markit’s Purchasing Managers’ Index fell to 53.3 from 54.5 in January. While that’s above the 50-mark that divides expansion from contraction, it’s a bigger drop than economists had forecast. The composite PMI data also fell below the estimate and the prior reading.
“The numbers certainly increase the concerns that investors are having that the resistance of the UK economy we’ve seen so far is not sustainable against the background of the Brexit uncertainty,” said Thu Lan Nguyen, a currency strategist at Commerzbank in Frankfurt. “That is certainly a burden for the pound.”
The UK’s services slowdown stands in contrast to the eurozone’s where output reached the highest level in almost six years in February as growth in the region’s top four economies accelerated. That is adding to speculation that the Bank of England will likely refrain from tighter policy in the face of Brexit-related uncertainties despite a pickup in inflation.
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