The British Pound Sterling, on Friday, March 10 steadied after its weakest fortnightly performance in five months, with investors worried that Britain’s economy is heading for a slowdown on the back of sluggish consumer spending.
Data showing British factory output had its strongest growth in nearly seven years in late 2016 and early 2017, with exports also growing quickly, had only a marginally positive effect on sterling, which inched up against the dollar on the numbers but stayed down versus the euro.
While the data followed other strong manufacturing numbers earlier this week, the sector accounts for only around 10 percent of Britain’s economy.
Other numbers continue to suggest consumers, whose spending helped cushion the shock vote for Brexit last June, are turning more cautious. Separate data on Friday showed Britain’s shops endured their worst fall in February sales since 2009.
The pound was flat at $1.2169, having fallen around 2.5 percent in the past two weeks, its weakest showing since October 2016, with its move downwards exacerbated by a simultaneous dollar rally on the view that the U.S. Federal Reserve will hike interest rates next week.
“If we’ve had this kind of move, and we know that sterling relative to fair value is one of the cheapest around – if not the cheapest – I just think there’s reluctance to add to shorts,” said UBS Wealth Management currency strategist Geoffrey Yu, in London.
Some analysts said sterling was also being kept under pressure by talk of another Scottish independence referendum.
The Financial Times reported on Friday that another vote is now looking inevitable, and that government ministers have concluded that it is a question of when such a vote will be held.
Against a single currency that was given a boost on Thursday by comments from European Central Bank President Mario Draghi that investors saw as somewhat hawkish, sterling slipped 0.3 percent to 87.19 pence per euro.