LONDON: Sterling slid to a 17-month low against the dollar on Tuesday as further signs that Britain's economic recovery may be losing steam prompted investors to push back expectations of when the Bank of England will raise interest rates.
A monthly survey of purchasing managers showed growth in Britain's dominant services sector slowed to its weakest rate since May 2013 last month, adding to a run of disappointing data that has seen sterling shed more than 3 percent in the past month.
Separate figures from the BoE showed lenders predicting no significant increase in corporate loans in the next few months, largely due to their economic outlook deteriorating at the fastest rate since the end of 2008.
Sterling fell to $1.5152, though it later recovered a little after weaker-than-expected U.S. data. By 1530 GMT, it was trading down 0.5 percent at $1.5181.
"The possibility that we might have reached a turning point in the (UK) growth numbers is definitely there, and that's what's weighing on sterling," said Alvin Tan, a currency strategist at Societe Generale.
Tan said the weaker data was driving investors to push back bets on when the BoE will start raising rates. Many now reckon that will not happen until the second quarter of 2016. .
Against the euro, the pound weakened around 0.3 percent to 78.46 pence, contributing to it hitting a five-week low against a trade-weighted basket of currencies.
"Clearly the data on the downside is gathering a degree of momentum now," said Neil Mellor, a currency strategy at Bank of New York Mellon. "But ... you could argue that an even bigger part of what is happening is political uncertainty."
Britain is four months from what is tipped to be the closest-fought parliamentary election in a generation, which could open the door to a referendum on exiting the European Union. Many investors worry that would be highly damaging to the UK economy, and that those concerns are beginning to weigh on the currency.
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