Sterling fell across the board on Thursday after worries about the health of the global economy and particularly China sparked an investor exodus from currencies considered riskier. The pound, already struggling to make headway amid concerns about Britain's departure from the European Union, plummeted to its lowest since April 2017 in early Asian trading after a "flash crash" - triggered by massive stop-loss sales in Japan's yen - forced widespread selling of sterling.
The British currency hit as low as $1.2409 against the dollar, while it fell to as weak as 91.02 pence per euro, a 16-month low. Markets had stabilised somewhat by 1600 GMT but the pound was still lower. Against the dollar it dropped 0.1 percent to $1.2593. Versus the euro it was 0.6 percent weaker at 90.50 pence.
"There's nothing new in UK news and no reason to own sterling, though EUR/GBP upside is probably limited to a return to 0.91 (91 pence per euro)," said Kit Juckes, currencies strategist at Societe Generale. A widely-watched survey published on Thursday showed Britain's construction sector fell to a three-month low in December, though businesses were more upbeat about the coming year.
The IHS Markit/CIPS UK Construction Purchasing Managers' Index (PMI) fell to 52.8 from 53.4 in November, broadly in line with the consensus expectation of 52.9 in a Reuters poll of economists. Adam Cole, chief currencies strategist at RBC, said the construction PMI was "unlikely to get the kind of boost from inventory building that was the case in the manufacturing survey". That survey, published on Wednesday, showed British factories had ramped up their stockpiling ahead of Brexit.
The PMI survey for Britain's much larger services sector is due out on Friday. Reduced expectations for a Bank of England interest rate rise in 2019 are also weighing on the pound, as are concerns about whether British Prime Minister Theresa May can convince lawmakers to back her Brexit withdrawal arrangement before a scheduled departure date in March. A parliamentary debate on May's deal with Brussels kicks off next week, with a vote scheduled for the week of Jan. 14.
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