Sterling fell by one per cent to a 15-year low against the dollar and a three-week lows against the euro today, as investors bet a Labour landslide in British elections would pave the way for sterling to join the euro.
An expected victory for the Labour party will encourage the government to hold an early referendum on euro entry, analysts said.
Sterling needs to be lower than current levels to join the euro, the currency of its main trading partners, to ensure competitiveness for Britain's exporters, analysts added.
Sterling's price action shows the market is speculating that a sizeable Labour victory will make an early EMU referendum more likely, said Mr Nick Stamenkovic, senior strategist at Nomura International.
Weak British economic data released on today compounded sterling's woes.
Britain's manufacturing output slumped 0.9 per cent on the month in April, its worst performance since August 1997.