Sterling falls against the dollar as UK economy slows but US picks up
The pound has fallen against the dollar as traders near the end of their week after survey data was better than expected in the US but painted a gloomy picture of the UK economy.
Sterling was trading 0.59 per cent lower against the greenback by 4.40pm, taking it to $1.283.
Read more: FTSE 100 leads European markets as China signals desire to strike US trade deal
A falling pound alongside positive noises from China concerning a US trade deal helped the FTSE 100 end the day 1.22 per cent higher.
Traders sold off sterling following a worse-than-expected survey reading which showed that the UK private sector has suffered its biggest fall in output in over three years in November.
By contrast, US factory and services activity picked up pace this month, a survey from data firm IHS Markit showed.
The reading, which was better than analysts had hoped for, boosted the dollar. Against the euro, for instance, the dollar has risen 0.25 per cent to €0.906 by 4.40pm UK time.
Connor Campbell of trading platform Spreadex called the UK figures “nasty, nasty numbers”. He said they were “so bad that sterling was swiftly booted into the red”.
Andy Scott, associate director at risk assessor JCRA, said: “Sterling reacted negatively to today’s data which points to economic activity declining in November.”
He added that the reading supports the case made by the two Bank of England rate-setters who voted for a rate cut last month.
“The economy is clearly reflecting the strain placed on businesses from Brexit negotiations and the continuing state of flux,” he said, “added to which is a general election that includes one major party pushing for a relatively hard Brexit and radical socialist policy proposals from the other.”
Read more: How the pound would react to a Tory General Election victory
Scott said the outlook for sterling “very much hangs on the outcome of the election, with the currency reacting positive to a number of voting intention polls that give the Conservatives a double-digit lead over the Labour party”.
A Tory majority is seen by most traders as a positive outcome for the pound as it increases the chances of Britain leaving the EU with a Brexit deal, which they hope would end some of the recent economic uncertainty.