After riding high on reports of an agreement on the Irish border, Brexit issue, the British pound lost all the ground it had made, plus more, on news that wasn’t quite the case. Sterling then came under further pressure Tuesday morning, on disappointing data, too.
By 1045 BST, the British pound was trading at $1.3418. While that’s an improvement on the $1.3382 it hit earlier Tuesday, it’s over a cent lower than the highs of $1.3538 it touched Monday.
More work to be done
Around mid-morning Monday, reports were coming out that the Irish Prime Minister Leo Varadkar, had approved an agreement with the key wording “regulatory alignment”, to help avoid a hard border within Ireland.
However, it transpired later that day, after a meeting between UK PM Theresa May and European Commission president, Jean-Claude Juncker, that wasn’t the case.
The Irish DUP party said they couldn’t support the agreement.
“We will not accept any form of regulatory divergence which separates Northern Ireland economically or politically from the rest of the United Kingdom,” tweeted DUP leader, Arlene Foster.
Despite this, possibly unexpected detail, the Irish and UK PM are both reportedly continuing work on an Irish border agreement this week, with hopes of a universally acceptable one before the week is over.
Data weighs too
But, it’s wasn’t just politics that saw investors selling the British pound Tuesday. A disappointing services PMI index also hit sentiment.
IHS Markit’s November PMI services index slipped to 53.8 from 55.6 in October. While a level of over 50 signals activity rose, it did so at a slower pace than a month earlier.
The survey showed the rate of new business grew at a slower pace than a month earlier. And, service provider’s costs rose at a fast pace, which they passed onto their customers.
“Slower service sector growth comes as a disappointment after the improved performances of both manufacturing and construction in November,” said IHS Markit chief business economist, Chris Williamson.
“Uncertainty about the economic outlook, linked commonly to Brexit worries, continued to permeate the business mood in November,” Williamson added.