Pound suffers rollercoaster ride as chaos in Westminster spooks currency markets

THE pound suffered a rollercoaster ride yesterday as it reacted to Brexit uncertainty and a string of grim economic warnings.

It dipped below the $1.20 mark in morning trading, a 34-year low excluding the autumn 2016 ‘flash-crash’ caused by automatic trading glitches.

But it rallied to close to $1.21 after Conservative MP Phillip Lee defected to the Liberal Democrats, removing the Government’s slim majority.

The move was thought to reduce the chances of a No Deal Brexit, which the markets believe will damage British business. In July, when Boris Johnson became Prime Minister, the pound was trading at $1.25.

The currency will remain volatile, experts said last night, as political uncertainty and grim economic news sweep the markets. Yesterday, IHS Markit said its purchasing managers’ index showed the construction industry on the brink of recession.

The sector suffered its biggest fall in new orders since the financial crisis as demand for housing, commercial property and civil engineering projects waned. It has now contracted for four consecutive months.

The figures came a day after factories reported their worst month since 2012.

Today, data on the dominant services sector will give the clearest pointer yet of how Brexit and the global slowdown are affecting the economy. Services accounts for more than three-quarters of UK output.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said business confidence has fallen ‘like a brick’.

Tim Moore, economics associate director at IHS Markit, said: ‘UK construction companies are braced for a protracted slowdown as a lack of new work to replace completed contracts begins to bite over the next 12 months.’ Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said there was hope of a rapid rebound if a Brexit deal can be struck.