LONDON: Sterling fell on Friday as Britain’s third national lockdown sparked the sharpest drop in business activity since May, while data showed retail sales remained weak in December after store closures the previous month.
With services companies hit hardest, the preliminary “flash” IHS Markit/CIPS UK Composite Purchasing Managers’ Index fell more than expected to 40.6 in January, well below the 50 threshold that indicates growth and down from 50.4 in December.
The weak PMI numbers followed data showing British retailers struggled to recover in December after shops in England emerged from a four-week November lockdown.
“The PMI reading itself wasn’t a shock,” said Simon Harvey, senior FX market analyst at Monex Europe. “It highlights what the retail sales data eluded to earlier, that January’s data will be a bitter pill for markets to swallow,” he said.
Sterling was 0.6% lower against the dollar at $1.3659 by 1025 GMT, but still on track for a second week of gains versus the greenback.
Versus the euro, sterling also dropped 0.6% to 89.14 pence, after hitting a 8-month high of 88.30 pence in the previous session.
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