LONDON: Sterling fell to its weakest since April against the dollar on Wednesday, with data from the dominant British services sector suggesting tardy economic growth at a time when investors' focus is on the debate over a "Brexit" from Europe.
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 fell to $1.4618, its lowest since mid-April with sellers targeting the low of $1.4567 struck on April 13.
A drop below that level will take sterling to its lowest since mid-2010.
Against the euro, sterling was steady at 73.30 pence "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."
The British economy grew at its slowest pace in three years in the July-September period of 2015, expanding by a quarterly 0.4 percent, according to data released last month.
Inflation is also subdued and wage growth is slowing, adding to a growing view that the Bank of England will be in no hurry to raise rates until at least late 2016 or early 2017.
A number of banks are also recommending selling the currency in the near term given the risk of a destabilising referendum on whether Britain stays in the European Union.
Prime Minister David Cameron has promised a vote on the matter by the end of 2017, but last month hinted it could come this year. Many are betting it could happen in June. With the outcome of the ballot unclear, sterling could face some uncertainty and volatility in the coming months.
Sterling had hit a 7-1/2-year high on a trade-weighted basis in August of last year on expectations the BoE would raise rates soon after the US Federal Reserve, which made its move last month.
But those bets are mostly off with the referendum also expected to tie the Bank's hands.
"Expect the Brexit debate to heat up as we move to the mid February European Union summit, where Cameron is looking for concessions. Money markets show high conviction that the BoE policy rate will not be touched in the next six months - and barely price the first hike in 12 months," said Chris Turner, head of currency strategy at ING.
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