LONDON: Sterling fell to a 13-month low against the euro on Wednesday after a raft of data releases showed a patchy British economic recovery, suggesting the Bank of England would not raise interest rates soon.
The pound also matched a 6-month low versus a currency basket hit on Tuesday and stayed close to a two-week low against the dollar as markets pushed back the chances of an increase in rates until year-end
The euro rose to 90.07 pence, its highest since April 2010, edging above Tuesday's peak of 90.06 as markets continued to factor in diverging rate outlooks with further hikes expected this year in the euro zone. Analysts said further near-term gains were likely for the euro but the currency was reaching levels that may be unsustainable.
"Whilst it is possible to build a 0.92/94 scenario based on a strong euro and a weak pound story, we do not believe these gains will last," Chris Turner, analyst at ING, said in a note. "Instead we will be looking for signs of a top."
The euro has not traded at 92 pence since October 2009. The record high for the single currency around 98 pence was hit in December 2008.
"Psychologically, it looks like we're heading to 92 pence, but I think we're in the last phase of this euro/sterling rally," said Kit Juckes, currency strategist at Societe Generale.
Sterling fell as low as $1.6453 in early trade against the dollar, slipping further from a 17-month high hit last week. It was last up slightly at $1.6521, dragged higher by a firmer euro.
Data from Nationwide overnight showed British house prices in April had their biggest seasonally adjusted fall since November, and manufacturing data on Tuesday showed the sector expanded at its slowest pace in seven months.
The UK construction purchasing managers' index, due at 0830 GMT, is likely to reinforce the weak data releases, with economists polled by Reuters predicting the index would come in at 55.5 in April, down from 56.4 in March.
Additional data releases due on Wednesday are UK mortgage approvals and lending, the Bank of England's consumer credit data, and UK M4 money supply.
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