LONDON: Sterling fell to a seven-week low on Friday, as a survey showed growth in Britain's dominant services sector cooling and British Prime Minister Theresa May played down talk of a fresh Scottish independence vote as the UK prepares to leave the EU.
In a speech to her Conservative Party's Scottish conference in Glasgow, May questioned the Scottish National Party's record in government, while reiterating her stance that there should not be another independence referendum.
That reflected political nerves over Scotland and the launch of negotiations over the terms of Britain's departure from the trading bloc, planned by the prime minister for this month. Along with a handful of weaker economic figures, those worries have spurred six days of losses for the pound against the dollar - its longest losing streak since December 2015, when markets began to price in the risk of a Brexit vote.
Commerzbank strategist Thu Lan Nguyen said Friday's moves were driven chiefly by data, but also reflected broader nerves over how the Brexit process will play out.
"The drop (in sterling) was mainly driven by the weaker PMI figures, which basically underlined that resilience we've seen so far in the economy is not sustainable," she said.
"The figures are just a confirmation of concerns that the economy may now be feeling the impact of the Brexit referendum."
The Markit/CIPS index of sentiment among purchasing managers at British services companies fell to 53.3 from 54.5 in January, its weakest level since September and below the consensus forecast of 54.1 in a Reuters poll of economists.
The data release drove the pound as much as 0.4 percent lower against the dollar to a seven-week low of $1.2215.
Against a broadly stronger euro, sterling fell 0.6 percent to 86.16 pence, having traded at a four-week low of 86.25 pence soon after the PMI was released.
Sterling has fallen 1.5 percent this week on the Bank of England's broader index of its strength, having fallen through support around $1.24 and then $1.23.
Friday's survey added to data suggesting investment and the economy at large is finally beginning to slow following June's vote to leave the EU, which has already knocked around one-fifth off the value of the pound, in turn pushing up inflation.
"Whilst the headline figures won't cause panic for the Bank of England, (Governor) Carney's warning of the delayed reaction of last year's Brexit vote could really be kicking into gear, ironically just as Article 50 is to be triggered," said Alex Lydall, Head of Dealing at corporate broker Foenix Partners.
"(Rising inflation) doesn't bode well for importers in the short-term."
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