Britain’s pound weakened against the dollar on Wednesday, ending a six-day rally, but staying well off recent lows as British Prime Minister Liz Truss spoke at the Conservative party conference on Wednesday.
Truss urged the Conservative party to stick together and help transform the economy and the country, as she fights to restore her dwindling authority after a chaotic first month in office.
At 1112 GMT the pound hit a session low of $1.1346 versus the dollar, down 1.1 per cent. Against the euro, the pound was down 0.4 per cent at 87.410 pence per euro.
After tumbling to a record low of $1.0327 against the dollar last week in the aftermath of the government’s ‘mini-budget’ announcement, the pound has recovered some ground. It was also boosted on Monday after the government reversed a cut to the highest rate of income tax.
“Compared to the wild swings over the past week or so it’s not a significant move,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, referring to the pound’s performance.
Sterling got a small uplift after the final S&P Global UK Composite Purchasing Managers’ Index came out slightly higher than first estimated.
Despite the slightly better reading, the data brings into focus the challenges facing British businesses as they suffer the sharpest contraction in activity since early last year.
Amid recession fears and concerns around the UK’s fiscal policy, the pound is down 16.5 per cent versus the dollar so far in 2022.
Meanwhile, the dollar has been rising, as the US Federal Reserve hiked interest rates aggressively to control inflation.
The Bank of England is also battling to control soaring inflation, with the market expecting a bumper hike of 100 basis points at its next meeting in November.