Pound pressured by worries over economy

By 3:11 p.m., sterling was down 0.3 percent at $1.9691. It hit a one-week low at 210.28 yen. Reuters - Wednesday, July 9 06:19 am

LONDON (Reuters) - The pound edged lower versus a broadly firm dollar on Tuesday after data on British companies and the housing sector underlined the gloomy economic outlook.

The pound was also pressured by a pick up in risk aversion, illustrated by a sharp fall in the FTSE 100 index of leading shares.

A survey of nearly 5,000 businesses by the British Chamber of Commerce showed firms facing their worst cashflow situation since records began in 1992, with the downturn particularly evident in the service sector.

There were also further signs of a slowing property sector, where two-thirds of the population own their home.

Government figures showed annual house price inflation slowing to 3.7 percent in May, while Persimmon, the country's biggest house builder by market value, cut over a quarter of its workforce and said the market remained difficult.

"All the signs are that the UK economy is heading towards a recession," said Ian Stannard, senior foreign exchange strategist at BNP Paribas.

"Sterling is now responding to this deteriorating outlook in the UK and I think we will see it under increasing pressure."

The euro was steady at 79.53 pence.

The Bank of England is widely expected to leave rates on hold at 5 percent on Thursday, but further ahead the outlook is less clear, with markets pricing in the possibility of a hike by year-end while economists still reckon a cut is more likely.

Wednesday's diary features May trade data and the June shop price index from the British Retail Consortium (BRC).

(Reporting by Toni Vorobyova; Editing by Gerrard Raven)

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