Sterling hovered near a 15-month low against the euro on Friday after a weak UK manufacturing survey backed the view that the Bank of England is likely to keep interest rates at record lows well into next year. The pound fell to its lowest since mid-March 2010 versus the single currency before trimming losses as the single currency turned lower against the dollar due to above-forecast US data and concerns about whether Greece can implement tough austerity measures.
The euro was last at 90.27 pence, having earlier hit 90.84 pence. More gains would see it target the March 1, 2010 high of 91.50 pence then the late October 2009 high of 92.40 pence. The euro may struggle to stay above the 90 pence level as previous forays above there have tended to be short-lived, although analysts said increased speculation the central bank may consider more monetary easing could help it extend gains. "The pound was slammed down on the PMI data, but euro/sterling does not sit comfortably above 90 pence," said Neil Mellor, currency strategist at Bank of New York Mellon.
"Sterling has nothing going for it - it has no yield, fiscal problems, strikes, basically no ticks in any box." The purchasing managers' index on UK manufacturing sank to a 21-month low of 51.3 in June from May's downwardly revised 52.0, worse than expectations for 52.1 and reinforcing concerns about a faltering UK economy.
The pound's falls dragged sterling's trade-weighted index to a 15-month low of 77.5. Against the dollar, sterling was steady at $1.6046, just above its 200-day moving average - a key technical barometer - around $1.6040. A weekly close below this level would be seen as a bearish signal that could prompt further falls, with the first target the recent five-month low of $1.5912. The pound has lost almost 10 percent against the euro since early January when it traded as high as 82.85 pence per euro as market players rapidly scaled back expectations for when UK interest rates will rise.