The British pound starts off 2021 on the same foot as 2020, and that’s a weak one due to renewed lockdown measure to battle the surge in coronavirus cases.
The weaker-than-expected services PMI data was also likely a drag on Sterling, as well as signs of the difficulty U.K. business are facing with the new Brexit rules in place.
United Kingdom Headlines and Economic data
England imposes new lockdown measures on new COVID-19 strain – it’s a high probability that the U.K. economy will take a future hit due to new lockdown measures, so it’s likely this headline was the catalyst for Sterling’s strong move lower against the majors.
UK shop prices slide again in December: BRC – “The British Retail Consortium (BRC) trade body said shop prices fell 1.8% in annual terms last month, matching November’s rate of decrease and a bigger fall than has been typical over the past 12 months.”
U.K. Service sector activity falls again in December – “The headline seasonally adjusted IHS Markit/CIPS UK Services PMI® Business Activity Index posted 49.4 in December, up from 47.6 in November but still below the 50.0 no-change threshold. Moreover, the downturn in service sector output recorded on average in the final quarter of 2020 (49.5) contrasted with a solid pace of recovery during the third quarter (57.1).”
U.K. construction sector recovery continues in December, led by house building – “The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index posted 54.6 in December, little-changed from 54.7 in November and above the crucial 50.0 no-change threshold for the seventh consecutive month.”
BOE Governor Bailey warns Brexit will bring big economic losses – “In his first public comments since Britain completed its withdrawal from the bloc on Dec. 31, Bailey endorsed warnings from the Office for Budget Responsibility, the fiscal watchdog, that gross domestic product will be as much as 4% lower in the long term than it would be had the country remained in the EU.”
UK house prices hit record high in December 2020: Halifax – “The average house price in Britain hit 253,374 pounds (about 343,721 U.S. dollars) in December 2020, marking a fresh record high after consecutive months of increase, the mortgage lender Halifax said Friday.”