Sterling slides as poor data highlights slowing growth

LONDON, May 7 (Reuters) - Sterling slid to a 2-1/2 month low versus the dollar on Wednesday with weak consumer morale, output and jobs figures keeping investors focused on a sharply slowing UK economy and the prospect of further UK interest rate cuts.

British manufacturing output fell unexpectedly in March at its sharpest rate in six months as a decline in car production led to a retreat after two months of strong growth [ID:nONS003506].

Data released earlier by Nationwide Building Society also showed British consumer morale fell in April to its lowest since records began four years ago [ID:nL06938733].

Further evidence of a weakening economy came in a survey showing the number of permanent job placements in Britain fell for the second time in three months in April as growth in vacancies for permanent staff languished at its weakest since mid 2003.

This has led some investors to price in an increased chance of a rate cut when the Bank of England announces its decision on Thursday.

"We think that there could be a rebound in sterling if the BoE keeps rates on hold as there is a one-in-four chance of a cut priced in, but we are still negative on the longer term outlook on the pound," said Lee Hardman, currency economist at BTM-UFJ.

By 1415 GMT, the pound had fallen over 1 percent as low as $1.0518 <GBP=>, its lowest since late February. The euro was up 0.2 percent at 78.84 pence <EURGBP=>.

The BoE's monetary policy committee kicked off its two-day policy meeting on Wednesday, with most analysts polled by Reuters expecting interest rates to stay on hold, while 40 of 65 predict a cut will come in June [BOE/INT].

The European Central Bank also comes under the spotlight on Thursday with its rate verdict. The single currency zone's central bank is seen holding rates steady at 4 percent. (Reporting by Simon Falush; Editing by Ron Askew)