London – The pound headed for its longest losing streak against the euro since August amid evidence that the UK’s decision to leave the European Union (EU) is starting to hit economic data just as European policy makers strike a more positive note on the region’s own prospects.
Sterling depreciated for a sixth day versus the euro, and also headed for a second week of declines against the dollar.
Reports on Friday showed manufacturing, industrial and construction output all shrank in January from the previous month, adding to evidence that the trend of robust data following the Brexit vote may be coming to an end.
The euro is also strengthening after European Central Bank (ECB) President Mario Draghi gave a more upbeat outlook for the region’s economy at a press conference yesterday.
The UK’s recent resilience was mainly due to the rise in consumer debt, “which is unsustainable,” said Erik Weisman, chief economist and fixed-income portfolio manager at MFS Investment Management.
“I am bearish on the pound and I think it will be lower a year from now. Similarly, while the UK economy will not unravel due to Brexit, I would expect the process to take a toll on growth for many years to come.”
Friday’s reports come after housing data yesterday showed demand had dropped to a six-month low last month while data last week showed Britain’s key services sector expanded at the slowest pace in five months in February.