Sterling fell against euro boosted by higher European bond yields on Monday, extending two weeks of losses suffered on a sharp sell-off of euro zone bonds and a run of weaker-than-expected UK data.

Figures released last week showed growth in Britain’s dominant services sector suffered its steepest slowdown in nearly four years in May, suggesting the economy might not recover as quickly as hoped after stumbling in early 2015.

Inflation fell into negative territory for the first time since 1960, bolstering investors’ view that any rise in interest rates from the Bank of England was unlikely before the middle of next year.

Sterling was 0.4 per cent weaker against the euro on Monday at 73.04 pence, not far from a four-week trough of 73.87 pence touched last week.

Against the dollar, the pound edged down 0.2 per cent to $1.5250. It had earlier risen to as high as $1.5305 on reports that US President Barack Obama had flagged the strong dollar as a problem, but the greenback strengthened after the Whitehouse denied the reports, dragging down the pound.

“Sterling has been whipped around by the euro and the dollar in recent weeks,’’ said Alvin Tan, a currency strategist at Societe Generale, arguing that the pound had been more dependent on moves in the euro and dollar in recent weeks than on UK developments.

But investors will on Wednesday be focusing on BoE Governor Mark Carney's annual Mansion House speech, which last year triggered a sharp and sustained rally in sterling when he unexpectedly indicated that interest rates would rise sooner than markets then expected.

“With Q1 activity data having been softer than expected and inflation, albeit temporarily, below 0 per cent year-on-year, it would be at least as surprising as it was last year if Governor Carney were to repeat his now famous intervention," wrote RBC strategists in a research note.

“His remarks on a relatively elevated exchange rate will be closely followed.’’

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