Belfast Telegraph

Sterling struggles after weaker UK services data surprises investors

Sterling struggled to recover after weaker-than-expected UK services data sent the currency to six week lows against the US dollar.

The pound was languishing near 1.224, down nearly 0.2% against the greenback, marking its lowest level since mid-January.

Against the euro, sterling fell 0.6% to a near-one month low of 1.160.

Investors were caught by surprise after the closely-watched Markit/CIPS services purchasing managers' index (PMI) fell to 53.3 in February, down from 54.5 in January, and below economists' forecasts of 54.1.

While a reading above 50 indicates growth, the data showed that Britain's powerhouse service sector grew at its weakest pace since September amid cautious household spending and a steep rise in operating costs linked to sterling's collapse.

Michael Hewson, chief market analyst at CMC Markets UK, said: " The pound has remained under pressure today after services PMI data for February came in at its lowest level in five months, though it still remains firmly in expansionary territory at 53.3.

"The numbers still show that the UK economy is on course to grow at 0.4% in Q1, which is a slowdown from the 0.7% seen in Q4, but also not surprising as the lagging effect of higher prices starts to weigh on consumer spending."

The FTSE 100 also failed to eke out gains, falling 0.1% or 8.09 points to 7,374.26.

It was weighed down in part by shares in advertising giant WPP, which dropped 152p to 1,759p after warning that "tepid" economic growth in 2017 could impact the business.

WPP was the worst-performing stock on London's blue chip index.

London Stock Exchange Group shares fell 27p to 3,116p after reporting a fall in profits from £357.1 million to £192.9 million for 2016, having been stung by costs associated with its shaky £21 billion merger with Deutsche Borse.

Chief executive Xavier Rolet, who had been expected to retire following the completion of the deal, said he may be "back in the seat" as the deal looks set to fall through due to competition concerns.

Across Europe, the French CAC 40 rose 0.6% while the German Dax dropped nearly 0.3%.

In oil markets, Brent crude prices rose over 1% to 55.61 US dollars per barrel (£45.42), thanks in part to a slight drop in the strength of the US dollar. A weaker greenback makes the dollar-denominated commodity cheaper for international investors.

The biggest risers on the FTSE 100 were Old Mutual up 4p to 225.6p, Standard Life up 6.5p to 378.5p, CRH up 45p to 2,885p, and Merlin Entertainment up 6.1p to 488.1p.

The biggest fallers on the FTSE 100 were WPP down 152p to 1,759p, Fresnillo down 42p to 1,413p, Hikma Pharmaceuticals down 59p to 2,126p, and Paddy Power Betfair down 165p to 8,720p.

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