Pound declines a third day before Osborne presents UK budget

[LONDON] The pound weakened for a third day as investors prepared for UK Chancellor of the Exchequer George Osborne's eighth annual budget.

The UK currency dropped the most in three weeks against the dollar on Tuesday. The Chancellor has warned that more savings, including public-sector spending cuts, will be required as economic risks intensify.

Sterling is the worst-performing major currency over the past month amid concern that Britain will quit the European Union at a June 23 referendum, threatening trade and economic stability, and keeping interest rates at a record low for longer.

The Bank of England is scheduled to announce its latest policy decision on Thursday.

The pound fell 0.3 per cent to US$1.4107 as of 6.46 am London time, having slid 1.1 per cent on Tuesday, the biggest drop since Feb 22. The UK currency weakened 0.2 per cent to 78.63 pence per euro.

Separate reports Wednesday will show the UK unemployment rate held at a decade-low of 5.1 per cent in the three months through January, while earnings growth picked up to 2 per cent, according to the median estimates of economists in Bloomberg surveys.

Forward contracts based on the sterling overnight index average, or Sonia, aren't fully pricing in a 25 basis-point increase to the BOE's official rate until 2017 at the earliest. Economists in a monthly Bloomberg survey put the likelihood of a cut to the 0.5 per cent benchmark rate this year at 23 per cent, up from just 10 per cent in February.

BLOOMBERG