The British Pound Sterling crashed to a six-week low against a broadly stronger U.S. dollar on Wednesday, March 1, as a weaker-than-expected batch of economic data added to political nerves.
The pound has been struggling in the face of figures in the past fortnight suggesting the UK economy was finally beginning to suffer from the uncertainty around Britain’s planned exit from the European Union over the next two years.
A regular survey of manufacturing purchasing managers on Wednesday showed the factory sector growing more slowly than expected in February, although holding on to much of its post-Brexit vote momentum in early 2017.
Possibly of greater concern for an economy entering a period of political uncertainty with a huge current account deficit, was the more than net doubling of sales of gilts by investors in January compared to December.
But it took a burst of selling after the arrival of U.S. traders after 1100 GMT to drive the pound first past support at $1.2350 and then below $1.23 for the first time since mid-January.
“You see the pattern we saw last year where you have a period of stability and then the downside break, so we could be back towards $1.20 in the next couple of months. It is partly the dollar story, partly sterling and the political concerns.”
Bank of England figures on Wednesday showed the pace of credit growth slowing for a second month. The gilts numbers showed net sales by foreign investors rose to 7.6 billion pounds compared with less than 3 billion in December.
“The focus (of the market) was on the foreign selling of gilts, which was the largest since 2014 and puts the spotlight back on the financing of the current account deficit,” said Kamal Sharma, a strategist at Bank of America Merrill Lynch.
Against the euro, the pound was also down 0.2 percent at 85.54 pence, Reuters reports.
