Pound Weakens On Risk Aversion

The pound slipped against its major counterparts in early European deals on Wednesday, as increased trade tensions between the U.S. and its key partners as well as the spreading selloff in emerging market currencies dented investors' appetite for risk.

The U.S.-Canada talks will resume today, while fresh U.S. tariffs on $200 billion worth of Chinese goods are expected to take effect as early as Thursday.

Emerging market woes persisted as South Africa slipped into a recession for the first time since 2009 and Turkey reported its highest inflation rate in 15 years.

Survey data from IHS Markit showed that UK services sector expanded at a faster pace in August on stronger new orders.

The IHS Markit/Chartered Institute of Procurement & Supply services Purchasing Managers' Index rose to 54.3 from 53.5 in July. The indicator has reached its second-highest level since February. The expected score was 53.9.

The currency held steady against its major rivals in the Asian session, with the exception of the franc.

The pound dropped to a weekly low of 0.9040 against the euro, from a high of 0.9000 set at 3:15 am ET. If the pound falls further, it may find support around the 0.92 level.

Final data from IHS Markit showed that the euro area private sector expanded slightly more than initially estimated in August.

The composite output index rose to 54.5 in August from July's 54.3. The score was marginally above the flash estimate of 54.4.

The U.K. currency weakened to near a 2-week low of 1.2804 against the greenback, after rising to 1.2870 at 10:15 pm ET. The pound is likely to challenge support around the 1.27 level.

Having advanced to a 2-day high of 143.68 against the yen at 9:30 pm ET, the pound reversed direction and eased to 142.75. On the downside, 140.00 is possibly seen as the next support level for the pound.

Survey from Nikkei showed that the services sector in Japan continued to expand in August, and at a faster rate, with a PMI score of 51.5.

That's up from 51.3 in July, and it moves further above the boom-or-bust line of 50 that separates expansion from contraction.

The pound edged down to 1.2478 against the franc, from a high of 1.2529 hit at 9:30 pm ET. The pound is poised to find support around the 1.22 level.

Looking ahead, U.S. and Canadian trade data for July are due in the New York session.

At 10:00 am ET, the Bank of Canada announces its decision on interest rate. Economists expect the benchmark rate to remain unchanged at 1.50 percent.