Pound tumbles as investors bet on UK rate hike delays

STERLING tumbled to a three- month low against the dollar as investors bet the Bank of England will not raise interest rates until well into next year.

The pound fell nearly half a cent to as low as $1.5266 – a level not seen since early June – before clawing back its losses.

Sterling was trading at nearly $1.58 early last week but has dropped sharply on speculation rates in the UK could stay at their historic low of 0.5pc for far longer than previously thought.

The latest slide came despite a report showing British builders have enjoyed their longest period of sustained growth for seven-and-a-half years. Markit said its index of activity in the construction sector – where scores above 50 show growth – ticked up from 57.1 in July to 57.3 in August.

British builders have clocked up a score above the crucial 50 level every month since May 2013. There have also been 27 successive months of rising employment in the sector – the longest period for just over nine years.

But David Noble, chief executive of the Chartered Institute of Procurement and Supply, which complied the figures with Markit, said: ‘With some doubt creeping in around the sustainability of the strength of the global economy, any rise in UK interest rates is unlikely to be anytime soon so growth rates are not stymied.’

Worries about a sharp slowdown in China and the global economy have torn through financial markets in recent weeks.

The FTSE 100 index closed up 24.77 points at 6083.31 yesterday following heavy losses of nearly 190 points in the previous session.

London’s blue chip index dived 6.7pc in August in its worst month for more than three years.