Chris Williamson, a Chief Business Economist at HIS Markit, commented: “The latest PMI survey results indicate that the UK economy is at risk of stalling or worse as escalating Brexit uncertainty coincides with a wider slower slowdown in the global economy.”
The losses were muted somewhat by the earlier publication of the UK BRC like-for-like retail sales figures for January, which increased above expectation to 1.8 per cent.
Pound investors, however, are remaining generally cautious as Prime Minister Theresa May heads to Northern Ireland for two days of talks addressing the Irish backstop issue.
Mrs May is expected to say: “[W]e will find a way to deliver Brexit that honours our commitments to Northern Ireland that commands broad support across the community in Northern Ireland and that secures a majority in the Westminster parliament, which is the best way to deliver for the people of Northern Ireland.”
This follows EU Chief Brexit Negotiator, Michel Barnier, saying “[the] withdrawal agreement cannot be reopened,” adding “[the] Backstop [is the] only operational solution” while also intimating that the EU is ramping up preparations for a no-deal.
As fears of no-deal continue to mount, the pound struggles to make any further gains on the euro as the divide between the UK and the EU continues to show signs of widening.
Today also saw the publication of the Eurozone’s Markit PMI composite figures for January which decreased against December – although the figure was better than expected.
Any gains, however, were clipped following Italy’s services PMI for January which slid into contraction at 49.7 – denting the EUR/GBP exchange rate as confidence in the Eurozone’s third-largest economy dwindles.
These were followed by the publication of the Eurozone’s retail sales figures for December, which fell by -1.6 percent, alarming euro investors.
Mr Williamson, of IHS Markit, warned the Eurozone was close to stagnation, saying: “The Eurozone has started 2019 on a flat note, with growth close to stagnation amid falling demand for goods and services… What started as a manufacturing and export-led slowdown has shown increasing signs of infecting the service sector.”