LONDON (Reuters) - The pound fell to a 12-day low against the dollar on Wednesday, ahead of a Bank of England meeting on Thursday where monetary policymakers will try to quantify the impact of the coronavirus on the world’s fifth largest economy.
Prime Minister Boris Johnson said that his government would set out details of its plan to ease a lockdown against the coronavirus on Sunday, hoping that some measures could come into force the next day.
Britain has been slower than other European countries to lay out plans to reopen its economy.
Wednesday’s PMI data showed British construction suffered its sharpest decline on record in April, more than twice as large as the previous month, even though general building work was not included in the government-ordered lockdown.
The pound did not move significantly when the data was announced at 0830 GMT. But between around 0720 GMT and 0835 GMT, cable fell 0.7%, hitting a 12-day low of $1.2359, a move which analysts said had no specific trigger.
Graphic: Cable - here
Like many currencies, the pound is mainly subject to changes in global risk appetite, said Thu Lan Nguyen, senior FX strategist at Commerzbank.
“We had a phase in March particularly where more pound-specific factors were playing a role, but since April at least it’s moving more or less with global market sentiment.”
The construction PMI showed a steep monthly decline, falling far below even the lowest estimates from economists polled by Reuters.
Michael Hewson, chief market strategist at CMC Markets, said that the extent of the economic damage from coronavirus and the scale of a possible recovery were still unknown.
“The data was poor - an awful lot worse than an awful lot of people had predicted, which reinforces the fact that it’s very difficult to predict the levels of PMIs going forward,” he said.
“Which in turn makes it much more difficult to predict the extent of any rebound going forward, because if you can’t predict the downside risk it’s going to be even more difficult to predict the bounce back,” he said.
The UK has overtaken Italy to report Europe’s highest official death toll from COVID-19, the disease caused by the new coronavirus, data showed on Tuesday, increasing pressure on Prime Minister Boris Johnson over his response to the crisis.
Johnson’s health minister denied the findings of a Reuters investigation which found that Britain had prioritised hospitals over many elderly people in care homes in its fight against the coronavirus outbreak.
Against a stronger dollar, the pound was last at $1.2363, down 0.6% since New York’s close. Versus the euro it was down around 0.2% at 87.345.
The Bank of England will meet on Thursday and attempt to quantify the economic impact of lockdown measures, which official budget forecasters predict could push Britain’s economy into the worse collapse in 300 years.
“What central banks have done thus far in terms of making sure the financial system doesn’t seize up has prevented a health crisis turning into a financial crisis,” CMC Markets’ Hewson said.
“But that doesn’t mean it won’t be a financial crisis for an awful lot of people. It will, because if they lose their job and they cannot pay their mortgage and they cannot pay their bills, it’s a financial crisis.”
(The story fixes typo in CMC Markets in penultimate paragraph)
Reporting by Elizabeth Howcroft; Editing by Larry King and Mark Heinrich