Sterling falls in value

On Thursday, sterling fell against the euro and the US dollar after business data suggested that Britain is already in recession.

The December S&P Global/CIPS UK Services Purchasing Managers’ Index (PMI) was revised slightly lower. While it was higher than in November, new business was down for the second month in a row, and the employment index was at its lowest since February.

The pound was 0.44% weaker against the euro, trading at 88.33 pence, on track for its biggest daily drop since December 21. It dropped 0.33% against the US dollar to $1.2019. The survey was conducted a day after Prime Minister Rishi Sunak promised to address Britain’s most pressing issues, including pledges to cut inflation in half, grow the economy, and reduce debt.

Sunak is expected to announce legislation to limit strikes. Britain faces a wave of strikes in various sectors, including the rail network, as rising inflation follows more than a decade of stagnant wage growth, leaving many workers unable to make ends meet.

Following the release of the latest Federal Reserve minutes, the dollar was roughly flat in choppy trading on Thursday.

Details of the central bank’s December policy meeting, released on Wednesday, revealed that policymakers remain focused on containing inflation and do not anticipate interest rate cuts in 2023.

Analysts said the minutes were broadly aligned with expectations, which explains the market reaction.

The euro last traded at $1.061, up 0.05% against the dollar. It gained 0.54% on Wednesday after French inflation came in lower than expected, boosting investor confidence in the eurozone’s economy.

Despite a surge in COVID-19 cases, the onshore yuan rose more than 0.3% to 6.872 per dollar, as China’s reopening measures supported the currency.

The Australian dollar was last down 0.11% to $0.683, while the New Zealand dollar was up 0.06% to $0.629.