Britain’s currency fell on Tuesday to its lowest level in two weeks — slipping below the $1.30 mark — after data showing the dominant services sector almost stalled last month added to the sense of gloom.
Sterling had dipped 0.5 per cent on the US dollar by mid afternoon, trading at $1.298. The fall was similar against the euro, with the currency off 0.4 per cent at €1.135.
The pound has pulled back from January highs above $1.32 with investors and analysts deeply uncertain over the UK’s exit from the EU, which is now just weeks away.
A closely watched survey released on Tuesday, showing UK services sector growth had eased to the weakest pace since the direct aftermath of the June 2016 Brexit vote, highlighted the real-world effect of the turbulent political climate.
Theresa May is expected to kick off the latest round of negotiations with Brussels later this week as the prime minister hopes to make a new deal that can pass parliament.
“Expectations for a breakthrough before then are low and it appears the recent positivity baked into the pound from reduced ‘no deal’ is waning,” said Lee Hardman, currencies strategist at MUFG.
The weaker pound provided a boost to the FTSE 100 index of large-capitalisation British companies, sending it up 1.5 per cent by mid afternoon. The benchmark has as members multinational companies that tend to benefit from a weak pound when they convert revenue earned abroad back into sterling.
The more domestically-focused FTSE 250 was up by a slimmer 0.2 per cent.