Sterling hit a five-month low against the euro on Wednesday as weak UK consumer confidence data and a mixed employment report reinforced concerns about the UK's economic recovery. Data showed the number of Britons claiming jobless benefits last month rising but the wider measure of the unemployment rate dipping in August to its lowest in more than a year.
Weakness in the UK economy has increased speculation that the Bank of England may need to pump more money in through quantitative easing. On Tuesday, Bank of England policymaker David Miles said QE remained a powerful tool and one that the Monetary Policy Committee might come to use.
The Nation-wide data was the trigger for sterling to dip to a five-month low of 88.39 pence versus the euro. By 1455 GMT, it had recovered back to flat at 88.00. Trade-weighted sterling fell to a 4-1/2 month low of 79.1 on the back of the euro's gains against the UK unit. Versus the dollar, sterling traded quietly, holding slight gains at $1.5837 and trading above a one-week low of $1.5755 hit the previous day. But analysts said there were signs that sterling weakness was set to stay. CFTC data released on October 8 showed speculative positions in sterling close to flat at just 9,403.
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