Sterling eased on Thursday after the Bank of England delivered its fifth interest rate rise in less than a year but hinted it may not step so hard on the monetary brake in the future.
The bank raised interest rates by a quarter-point to 4.75 percent in a widely-expected move to cool Britain's booming economy.
Some in the market had bet on an even bigger rise and sterling's reaction to the decision, and the accompanying statement, was to fall a quarter-percent against the euro and the dollar.
The Bank of England said higher borrowing costs were needed to keep inflation on track over its two-year horizon, but noted consumer demand and house prices were showing signs of moderating.
"With this decision and these comments you can see a way to the end of the rate hike cycle," said Chris Gothard, currency analyst at Brown Brothers Harriman in London.
"Not saying it's all over now - there may be one, maybe two, more rises - but they could be preparing us for the end of the cycle."
Rising interest rates have benefited the pound which has been one of the best performing currencies this year with gains of over six percent against the euro and two percent against the dollar.
By 1420 GMT, sterling was marginally lower on the day at 66.05 pence per euro, down almost half a penny from six-week highs hit earlier this week. The pound was down 0.15 percent against the dollar at $1.8220 but well above session lows.
News Britain's manufacturing output contracted in June took the shine off sterling even before the Bank of England's interest rate decision.
The Office of National Statistics said output fell 0.7 percent on the month in June after rising sharply in the past two months. Analysts had forecast a rise of 0.1 percent on the month.
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