Sterling set to stay under $2

The Sterling will stay well below the $2 mark over the next year as its value suffers further from a slowing economy and lingering expectations for more British interest rate cuts, a Reuters poll shows.

US Federal Reserve chief Ben Bernanke triggered a rally in the dollar on Tuesday after he warned about the inflationary impact of a weak currency and said he and the Treasury were carefully monitoring currency markets.

The survey of over 60 analysts, conducted before those remarks, showed they expect sterling to be at $1.96 in one month, $1.95 in three months and $1.88 in 12 months' time, little changed from forecasts in last month's survey.

In last month's poll, the one-month forecast was $1.97, the three-month consensus was $1.96 and the 12-month median forecast was for $1.90, a long way from a high last November of $2.10 - a level not seen in over 25 years.

"Sterling is expected to remain under downward pressure from elevated concerns about slowing UK growth and rising inflation," said Howard Archer at Global Insight, the second most accurate forecaster in the Reuters poll of major currencies this year.

Sterling tumbled against the dollar earlier last week, hit by a slowing housing market, a manufacturing sector on the brink of contraction and a profit warning from major mortgage lender Bradford & Bingley.

Some strategists still see the Sterling over the $2 mark in 12 months with the poll showing a wide end-year range between $1.69 and $2.15. The highest forecast in last month's poll also was for $2.15 in a year.

Sterling's current value is well above median forecasts in a poll last June which saw the pound around $1.92 at this time. Currency strategists had not foreseen a sharp drop in US economic growth, trouble in the financial sector and the Fed slashing rates as much as they have done.