Sterling's tumble against the U.S. dollar this week may mark the beginning of a longer fall into year-end amid expectations that interest rates will remain lower for longer, analysts say.
On Friday, Sterling weakened to $1.5671, its lowest level since September 2013, after weak housing data on Thursday cemented beliefs that the Bank of England (BOE) is unlikely to hike rates from their record low of 0.5 percent anytime soon. Sterling is down over 1 percent against the dollar this week and over 5 percent year to date.
"Sterling is the fall guy. The GBP/USD will fall all the way to 1.50," said Kit Juckes, macro strategist at Société Générale, in a note.
U.K. house price growth weakened to an 18-month low in October, a survey from the Royal Institution of Chartered Surveyors (RICS) showed, with the London index postings its biggest decline in four years. Fears of soaring national prices had previously underpinned expectations of an interest rate hike. In September, the BOE said that it could raise rates by early 2015.
"Markets were expecting the BOE to lead in interest rate normalization, but that's no longer the case given recent data," said Nizam Idris, head of strategy, fixed income and currencies at Macquarie.
Idris is slightly less bearish; he expects Sterling to stabilize around $1.55 in the near-term, but warned that the fledgling economic recovery in the euro zone – the U.K.'s largest export destination – remains a headwind.