Sterling fell to a 21-month low against the dollar and eased against the euro on Monday as concerns about the health of the UK economy undermined sentiment. Over a third of Britain's leading businessmen expect their companies to suffer redundancies due to the economic downturn, according to a survey released on Monday.
A poll of over 1,000 business leaders found 36 percent of them believe jobs will be lost and nearly half of bosses cut back on pay rises and large bonuses. UK manufacturers' costs fell more than expected in July but were still nearly a third higher than a year ago.
This provided a brief boost to the pound as it marginally increased expectations that the Bank of England may be able to deliver a growth-boosting rate cut. "There comes a point when the perception of the economy becomes so poor that any good news on the economy outweighs the impact on monetary policy," said Philip Shaw, chief economist at Investec. The pound fell as low as $1.9122, its lowest since November 2006, before recovering to $1.9185 by 1434 GMT - flat on the day. The euro rose 0.1 percent to 78.21 pence.