Forex

Sterling close to one-week low as data shows cooling economy

Pound drops

Sterling steadied close to a one-week low on Wednesday, as a survey of Britain's services businesses added to a string of weak-looking data that could deter the Bank of England from raising interest rates for the first time in 10 years.

A number of central bank policymakers, including Governor Mark Carney, have spoken in favor of soon reversing last year's interest rate cut, which followed Britain's vote to leave the European Union.

The hawkish remarks have helped the pound to reverse the 2 percent drop against the dollar that came after a snap election on June 8 left no party with a clear majority.

But readings of Britain's economy as it negotiates its exit from the EU could bolster arguments against raising rates too soon, even though inflation is well above the Bank's 2 percent target.

Sterling has lost around 14 percent against the dollar and 13 percent against the euro since Britain voted to quit the EU last June, though it has recovered some ground since hitting 31-year lows last October.

Data on Wednesday showed growth across British services companies fell to a four-month low in June, with companies at their least optimistic in nearly a year.

Sterling extended a dip below $1.29 after the data was released, falling as much as 0.3 percent lower to a one-week low of $1.2894 before recovering a touch to trade flat on the day at $1.2929.

Against a weaker euro, it edged up 0.2 percent to 87.67 pence.

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