The pound fell against the dollar and the euro on Wednesday after new data revealed business optimism has fallen to a five-month low, largely due to concerns over Brexit.
Sterling fell as much as 0.4 per cent against both the dollar and the euro, heading south of $1.281 for the first time in two weeks, and also falling below €1.11.
The Purchasing Managers Index for UK services in August came in better than expected at 54.3 in the month, up from 53.5 in July (any figure above 50 signals expansion).
However, the reading for business confidence declined to one of its lowest levels since the 2016 EU referendum, with the Chartered Institute of Procurement & Supply, which sponsors the PMI survey, noting anecdotal evidence that Brexit uncertainty continued to hold back business-to-business spending, especially in relation to large-scale projects.
“Though the sector remained in positive territory, the dark clouds of political indecision are still having an effect and preventing more business activity.
"Service providers are likely to continue along this vein for the rest of the year until those clouds have cleared,” said Duncan Brock of the CIPS.
Chris Williamson, chief business economist at IHS Markit, said the findings pointed to further gloom in the future.
“Given the increasingly unbalanced nature of growth and the darkening business mood, risks to the immediate outlook seem tilted to the downside,” he said.
Meanwhile, Fiona Cincotta, a senior market analyst at City Index, said: “Normally the weaker pound would have helped some major FTSE companies gain ground but instead the FTSE index weakened amid a general worsening of the market mood with trade concerns and Brexit worries lingering in the background.”
The FTSE 100 was down 0.42 per cent in early afternoon trading.
