Sterling posted its biggest weekly drop against the euro in more than two years as signs economic growth is slowing fuelled speculation the Bank of England will cut its key interest rate as early as next month. The pound declined against 12 of the 16 most-active currencies in the past week, tumbling to the lowest against the euro in 4½ years.
A report yesterday showed retail sales unexpectedly dropped and the Bank of England this week forecast economic growth will slow "sharply" next year and signalled at least one reduction in the benchmark rate.
"Sterling is likely to remain under pressure against the euro this year," said Martin McMahon, a currency strategist at Credit Suisse Group in Zurich.
Against the euro, the pound fell to 71.71 pence, the lowest since June 2003, before trading at 71.45 pence by 5.30pm in London, little changed from yesterday. It slid 1.9 per cent on the week, the biggest drop since July 2005.
The UK currency also weakened the most versus the dollar since August this week, sliding 1.9 per cent to $2.0505. That's up from $2.0451 yesterday.
The latest UK industry and government reports show signs the housing market boom has fizzled out and consumers are reining in spending as interest rates at a six-year high curb demand. - (Bloomberg)
