Sterling hit a 1-1/2 month low against the dollar on Monday after data showed a sharp slowdown in the UK services sector, fuelling speculation the Bank of England may resort to another round of asset purchasing to boost the economy. The pound was also hit along with other perceived higher risk currencies on concerns major economies may return to recession after weak US jobs data and mounting concerns about eurozone debt and banking sector problems.
The pound fell nearly 1 percent on the day to $1.6061, its lowest level since July 19. A close below its 200-day moving average at $1.6123 would be seen as technically bearish and could see it target a move towards $1.6000. It last traded at $1.6098. Market players said sterling would remain under pressure after the UK services purchasing managers' index unexpectedly fell to 51.1 in August from 55.4 in July, the biggest drop in more than a decade. It followed a survey last week showing manufacturing contracting at its fastest pace in more than two years.
The pound gained slightly against the euro, which was hampered by worries the eurozone sovereign debt crisis could spiral out of policymakers' control. The euro was down 0.1 percent at 87.55 pence and analysts said it may fall further towards its early August low of 86.44 pence as investors seek alternatives to the single currency.