LONDON: Britain's pound slipped on Tuesday after numbers showed activity in the construction sector unexpectedly slowed to a 14-month low in September, suffering the sharpest fall since just after last year's Brexit vote on concerns over the economic outlook.
Data last week showed speculators had turned positive on the pound for the first time in almost two years in the week up to last Tuesday, with expectations for a Bank of England interest rate hike as well as optimism around Brexit negotiations driving investors to buy back into the currency.
But it has fallen almost 2 percent against a stronger dollar in the week since then, hit by worries over Britain's economic health as well as divisions in the ruling Conservative party, whose annual conference is being held in Manchester.
Sterling slipped to as low as $1.3245 after the construction purchasing managers' index (PMI), which at 48.1 was far below all forecasts in a Reuters poll of economists. That left the pound trading down 0.3 percent on the day, having been trading around $1.3278 before the data release.
It also weakened to the day's low of 88.64 pence per euro .
"You'd need a clearer pattern of economic weakness to take (sterling) dramatically lower or to get the basic trend to be different," said Kit Juckes, macro strategist at Societe Generale in London.
"(But) the press reflects a view that there's no unity for a stable leadership in this government... We don't need political uncertainty to add to economic uncertainty to add to Brexit uncertainty."
Besides her own diminished authority and Brexit, Prime Minister Theresa May has been forced to contend with her ambitious foreign minister, Boris Johnson, in Manchester. And reports have also emerged that Home Secretary Amber Rudd is considering a leadership bid.
Tuesday's weakness in the currency marked the third straight day of falls for the pound. It slipped on Monday on the back of a weak reading from the equivalent PMI survey of the manufacturing sector, and on Friday after UK growth numbers were revised down.
"All eyes will now be on tomorrow's all-important services data - and if today's numbers are anything to go by, they may not spell good news," said OFX currency analyst Hamish Muress.
The PMI survey for the services sector is due at 0830 GMT on Wednesday.
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