Pound sinks to new two-and-a-half year low against dollar

Sterling suffers as no-deal Brexit plans ratchet up and dollar strengthens

Ben Chapman
Thursday 01 August 2019 11:05 BST
What moves currency markets?

The pound fell to a 31-month low against the dollar on Thursday and dropped a quarter of a cent against the euro.

Sterling sank 0.6 per cent against the dollar to below $1.21 after the US currency strengthened on the back of comments made by America's central bank chief.

Jerome Powell, the chairman of the US Federal Reserve, indicated on Wednesday that he was not about to embark on a series of interest rate cuts as many analysts had predicted.

That boosted the dollar against other major currencies, including the pound which has been battered by Boris Johnson's plans for a no-deal Brexit.

Sterling fell 0.23 per cent against the euro on Thursday morning to €1.0955.

Mr Johnson has stepped up planning for a disorderly exit from the EU in less than three months.

On Thursday Sajid Javid, the chancellor, committed an extra £2.1bn to efforts to stave off expected disruption caused by a no-deal Brexit, prompting accusations of wasting taxpayers’ money on an outcome opposed by MPs and voters.

The pound's latest tumble came after more gloomy economic data suggesting that the UK's manufacturing sector shrank for the third successive month in July as uncertainty surrounding Brexit and a global economic downturn caused firms to reduce their output.

The closely watched purchasing managers index (PMI) survey came in at 48 for the month, unchanged from June, with anything below 50 indicating contraction. The last time managers reported weaker activity was in February 2013.

Production volumes hit a seven-year low, dragged down partly because manufacturers sold off stocks built up to prepare for the Brexit deadline of 31 March, said IHS Markit which compiled the data.

While some firms were still running down stocks bolstered before the original Brexit date, others were re-starting these stockpiling efforts in preparation for the new October deadline, IHS Markit said.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: "A killer combination of economic uncertainty and the weakest production levels for seven years, battered the manufacturing sector into contraction for the third consecutive month in July.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies


Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in