Forex - GBP/USD drops to 31-month lows on weak U.K. data

The pound dropped to 31-month lows against the U.S. dollar on Friday, as the release of downbeat U.K. economic reports added to concerns over the country's outlook for growth. 

GBP/USD hit 1.5054 during European morning trade, the session low; the pair subsequently consolidated at 1.5044, dropping 0.79%. 

Cable was likely to find support at 1.5034 and resistance at 1.5186, the session high. 

Markit research group said that the U.K. manufacturing purchasing managers' index deteriorated unexpectedly in February, falling to 47.9 from a reading of 50.8 the previous month, re-entering contraction territory for the first time since December. 

Analysts had expected the index to rise to 51.0 last month. 

In a separate report, the Bank of England said that net lending to individuals fell to GBP0.6 billion in January, from GBP1.8 billion the previous month, exceeding expectations for a decline to GBP1.1 billion. 

The reports came after revised data on Wednesday confirmed that the U.K. economy contracted 0.3% in the three months to December, in line with initial estimates and economists’ forecasts.

The economy expanded by 0.3% year-on-year, better than initial estimates of flat output.

The weak data reinforced concerns over the threat of a triple-dip recession, after ratings agency Moody’s downgraded the U.K.’s triple-A rating by one notch last week, citing a weak outlook for growth and a rising debt burden.

Meanwhile, expectations for further monetary easing by the BoE remained intact after the minutes of the central bank’s February meeting indicated that policymakers are moving closer to another round of asset purchases. 

Market sentiment was also under pressure as automatic spending cuts in the U.S. worth USD85 billion were due to be introduced on Friday after U.S. lawmakers failed to reach a deal to avert them. 

U.S. President Barack Obama invited congressional leaders to the White House for last minute negotiations before the 11.59pm deadline. 

Sterling was also lower against the euro with EUR/GBP climbing 0.80%, to hit 0.8679. 

Later in the day, the U.S. was to release a report from the Institute of Supply Management on manufacturing activity, official data on personal spending and revised data on consumer sentiment from the University of Michigan.