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Pound continues to drop off

Sterling fell for a third straight day yesterday, hitting two-week lows against a broadly stronger dollar even though investors remained wary of selling it down too far before this week’s Bank of England meeting.

Currency markets have been relatively calm compared with equity markets which are suffering their fourth straight day of falls, with Britain’s FTSE index down almost 2 percent and lower for the sixth day in a row.

But as the dollar has strengthened, sterling has struggled, it has now fallen almost 3 percent since peaking at $1.4346 on Jan. 25 and is down more than 2 percent since Friday.

The currency has been hurt by the general flight from risk and weighed down by this week’s surveys confirming the poor shape of Britain’s economy and fresh tensions over its divorce negotiations with the European Union.

Economic growth is likely to slow to 0.3 percent in the first quarter, down from 0.5 percent in the last three months of 2017, financial data firm IHS Markit said.

UK data showing weaker service sector output and only modest growth in retail spending have not helped sterling sentiment, but the real driver of weakness has been broader market volatility.

While the Bank is expected to leave interest rates unchanged, many analysts are now predicting a rate rise in May, especially after BoE Governor Mark Carney recently sounded a more upbeat tone on the economy. The BOE also releases its inflation report on Thursday.

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