The drop in business activity led to a strengthening of the US dollar not only against the pound, but also against the euro.
The British pound fell sharply today as manufacturing data shows that the UK economy could fall into recession.
“The UK economy saw a “dramatic deterioration” in the wake of the Brexit vote, as a closely watched barometer of private sector business showed activity dropped to its lowest level since the financial crisis,” said Szu Ping Chan of The Telegraph.
“July saw a dramatic deterioration in the economy, with business activity slumping at the fastest rate since the height of the global financial crisis in early-2009,” said Chris Williamson, chief economist at Markit. “The downturn, whether manifesting itself in order book cancellations, a lack of new orders or the postponement or halting of projects, was most commonly attributed in one way or another to Brexit.”
The drop in business activity led to a strengthening of the US dollar not only against the pound, but also against the euro, as investors worried about the effects of a weakening British economy on European trade. The euro for a while traded below $1.10 and could reach parity with the dollar if trends continue.
“While the headline number is worse than expected, at a seven year low, and has predictably prompted some hysteria from a number of economic commentators the declines really shouldn’t be that surprising given the gridlock and turmoil at the top of government in the days after the vote,” Michael Hewson, of CMC Markets, said.