LONDON: Sterling remained on the defensive on Wednesday, touching its lowest level against the dollar in almost three months as investors continued to bet that the Bank of England won't raise interest rates until well into next year.
A report on UK construction sector activity released on Wednesday showed a slight increase in activity last month but not as much as economists had expected, fueling the belief that growth is slowing.
The pound traded as low as $1.5273 against the dollar , down slightly on the day and the lowest since June 9. The euro was down slightly on the day at 73.80 pence but within sight of 74.23 pence from late August, the highest since May.
"Sterling is suffering position fatigue among investors. This may leave it more vulnerable to data undershoots near-term," said Josh O'Byrne, currency strategist at Citi in London.
The CIPS/Markit construction Purchasing Managers' Index (PMI) rose to 57.3 in August from 57.1 in July, indicating solid growth but below the 57.5 forecast in a Reuters poll and levels of more than 60 regularly reached in 2014.
Sterling has lost more than 3 percent on a trade-weighted basis in the last two weeks alone as investors have pushed back the timing of the first Bank of England rate hike into next year.
Global volatility stemming from deteriorating markets in China and a darkening economic outlook for the world's second largest economy could keep the BoE on hold for longer than thought only a few weeks ago.
The earliest sterling money markets are pricing in a move is around March/April next year.
Britain is still one of the fastest-growing economies in the developed world but that may not be sustainable given the weakness globally.
In addition, UK inflation is virtually zero, making it more difficult for the BoE to justify higher rates.
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