Floundering pound dives to 13-year low

London: Sterling hit its lowest level in almost 13 years on Wednesday as another batch of dire economic data convinced investors that the Bank of England would slash interest rates to prevent a recession turning into a slump.

The floundering pound fell to 80.4 on a trade-weighted basis , its weakest since January 1996, after data showed Britain's dominant services sector contracted last month at its fastest pace since records began more than a decade ago.

Sterling has now fallen 17.5 per cent on the trade-weighted index since the start of the year.

Yesterday's figures on the service sector followed surveys earlier this week showing the country's manufacturing and construction sectors are also in sharp decline.

Economists said the pace of deterioration in Britain's economy and a sharp drop in price pressures gave the central bank ample room to follow up last month's stunning 150 basis point cut with another sharp reduction - probably of 100 basis points today.

Such a move would take UK interest rates to 2 per cent, their lowest level since 1951.