LONDON: Sterling slipped to its weakest since April against the dollar on Wednesday, after faltering growth numbers in Britain's large services sector fed the view the Bank of England will not raise interest rates any time soon.
Also weighing on the pound were worries over a potential "Brexit" from Europe, following a referendum on the issue that could come as soon as June and that is likely to complicate the timing of any BoE rate hike.
Bank of America Merrill Lynch, one of the world's biggest currency trading banks, on Wednesday said it had pushed back its expectation for the first BoE hike since the financial crisis to November this year, from May previously.
That was because of Brexit uncertainties, softer wages data and what BAML perceives as a shift in the BoE's communications.
"Recent BoE statements suggest to us an increasing preference for waiting longer, until they get closer to seeing the 'whites of the eyes of inflation'," strategists from the U.S. bank wrote in a research paper.
Sterling fell by as much as half a percent on the day, to a nine-month low of $1.4602, before recovering a touch, to $1.4620. That still left it just half a cent away from a 5-1/2-year low. Against the euro, the pound fell 0.4 percent to 73.57 pence.
The Markit/CIPS UK services purchasing managers' index fell to 55.5 last month from 55.9 in November. Economists in a Reuters poll had expected the index to slow to 55.6 after growing at its fastest pace in four months in November.
"Sterling is generally weak and the services data has not been of much help," said John Hardy, currency strategist at Saxo Bank. "The main driver has been rate hike expectations in the UK which are pretty much off the table."
Prime Minister David Cameron has promised a vote on Britain's membership of the European Union by the end of 2017, but last month hinted it could come this year.
With the outcome of the ballot unclear, sterling is likely to face uncertainty and, therefore, volatility in coming months.
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