Sterling drops as British firms suffer record slump

Sterling sank on Friday after data showed a record slump among Britain's services and manufacturing firms in late March as businesses and households paused activity to try to prevent the spread of the coronavirus.
Sterling was last down 1.5% at $1.2205, having fallen earlier to its weakest level since Tuesday at $1.2243. Against the euro, it fell 0.8% to 88.32 pence. Kit Juckes, macro strategist at Societe Generale, said the decline in the pound on Friday was exacerbated by low market liquidity for the currency as those traders still working have concentrated their attention elsewhere.
"It's clear that it takes less selling quantity to move sterling ... that will remain an issue," Juckes said, adding that the "fair value for euro/sterling is 85 (pence) but it'll take a lot of time to go there."
As the novel coronavirus spread around the world, claiming more victims and effectively shutting down many cities, the pound sank to its weakest in decades last month, as investors turned to less risky currencies, such as the US dollar.
It has recovered some ground since then, as the British government and Bank of England stepped in to provide stimulus to the economy and avoid a collapse in the labour market.
The number of people infected and deaths are on the rise, both in Britain and the rest of the world. Global cases of the virus have shot past 1 million with more than 53,000 fatalities, a Reuters tally showed on Friday.
A final composite Purchasing Managers' Index covering UK services and manufacturing fell to 36.0 from 53.0 in February, below a preliminary reading of 37.1, survey compiler IHS Markit and the Chartered Institute of Procurement and Supply said.
Ulas Akincilar, head of trading at online platform INFINOX, identified "two modest silver linings" from the dismal data: a fall in cost inflation and the mitigation of job losses as companies opt to furlough staff rather than lay them off. But that offered "scant comfort", he added.