Sterling drops below $1.45 as Brexit vote approaches, data adds to glum outlook
By Anirban Nag
LONDON, May 4 (Reuters) - Sterling fell broadly on Wednesday after data from Britain's construction sector added to a subdued outlook for the economy just months before the vote on Britain's future in the European Union.
The pound lost about 1 percent versus the greenback on Tuesday, weakened by a poor survey of manufacturing sector managers that underlined the economic risks posed by the June 23 referendum on the EU.
The equivalent survey of the construction sector on Wednesday showed output grew at its slowest rate in nearly three years in April, pushing the currency even lower.
"The report showed that construction firms reduced hiring ahead of the Brexit referendum, while clients appear to have delayed major spending decisions until the outcome is known," said Charalambos Pissouros, senior analyst at IronFX Global.
"This ... follows yesterday's slide in the manufacturing PMI and adds to concerns that the economy's slowdown during Q1 is likely to persist throughout Q2 as well."
Most economists reckon leaving the EU would deal a blow to the British economy, with a hefty current account deficit - 7 percent of GDP in the last quarter of last year - leaving Britain vulnerable to any pull-back in investment flows.
Worries about that have helped drive the pound down about 9 percent on a trade-weighted basis since late last year.
On Wednesday, sterling fell 0.35 percent to $1.4484 , almost three U.S. cents away from the four-month high of $1.4770 it had hit on Tuesday before the data.
It was also 0.2 percent lower against the euro at 79.25 pence per euro.
Traders said Thursday's services sector PMI survey could have a greater bearing on the pound and a miss is likely to see currency come under more pressure. A Reuters poll shows expectations for a slight dip to 53. 5 from 53.7 a month earlier.
"Tomorrow's services index is by far the most important and if it follows the decline in yesterday's manufacturing series, we would expect increasing talk that the looming EU referendum is weighing on business sentiment, which would be negative for sterling," RBC Capital Markets strategists wrote.
Investors are cautious about buying the currency given most polls show a neck-to-neck contest between those campaigning to stay in and those who want to opt out. On Tuesday, an ICM poll showed 45 percent of voters favoured a Brexit, against 44 percent who wanted to stay in the 28-member bloc.
Despite the closeness of most of the polls, bookmakers have consistently put the "In" campaign well ahead of those who want to leave the bloc. Betting website Betfair shows the chances of leaving at around 31 percent. (additional reporting by Jemima Kelly; Editing by Jeremy Gaunt)
