Sterling dived against the dollar and euro on Wednesday after UK manufacturing data came in much weaker than expected, bolstering the view a struggling economy will keep UK interest rates at record lows until next year. The Markit/CIPS manufacturing PMI headline index fell to 52.1 last month from a downwardly revised 54.4 in April, well below the 54.1 consensus forecast.
While the market had been braced for a softer reading, the unexpectedly steep drop sent sterling to a session low of $1.6376. In late London, it hovered near a key technical support level around $1.6400. A close below that may open the door to more losses in the near term. The euro rose to a session high of 88.06 pence, around 0.7 percent higher on the day. It garnered support after pushing above its 55-day moving average at 87.89 pence. Market participants said its next target was the May 20 high around 88.30 pence.
The pound also took a hit against other currencies, tumbling roughly 2 percent to 1.3785 Swiss francs, its weakest on Reuters data going back to 1995, as the Swiss currency rallied across the board. Sterling fell 2 percent versus the yen.