Pound struggles against dollar

Sterling struggled near a seven-year low against the dollar yesterday, with data showing the weakest British manufacturing growth in three years contrasting with equivalent US data that supported expectations for higher interest rates.

The pound has suffered an aggressive sell-off over the past three months, suffering an almost 9% fall on a trade-weighted basis, its worst performance in seven years, driven largely by worries that Britons may vote to leave the EU in a referendum on June 23.

A key concern for investors is that a Brexit, as well as further pushing back UK rate hike expectations, would threaten the huge foreign investment flows Britain needs to balance its current account deficit, one of the biggest in the developed world at 4% of output.