Sterling fell against a rallying dollar on Thursday as the US interest rate advantage over Britain looked set to widen. The US currency rose after minutes of the Federal Reserve's latest policy meeting raised expectations of a US rate hike in June to bring the cost of borrowing to 5.25 percent.
Weak recent British economic data, meanwhile, has cast some doubt on a rise in the key Bank of England interest rate, which stands at 4.5 percent. "There's a broad dollar comeback as the (Fed) minutes were hawkish," said Marios Maratheftis, currency strategist at Standard Chartered.
Higher deposit rates attract investors seeking better returns for their cash.
By 1400 GMT, the pound was down 0.6 percent at $1.8577, breaking through support at $1.8590. It traded at 68.54 pence per euro, little changed on the day.
Sterling was also rattled in overnight trading after an explosion at a chemical plant in northern England. However it quickly became clear that the blast had only slightly injured two people and was not a major incident.
British manufacturing activity eased more than expected last month although a recovery in the eurozone helped bump up export orders at their fastest rate in nearly 2-1/2 years, an industry survey showed on Thursday.
On Wednesday, the Nationwide Building Society said annual rate of increase in house prices slipped to 4.7 percent in May from 4.8 from April previously and the Bank of England said the number of mortgage approvals fell to 106,000 in April from a downwardly revised 114,000 in March.
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