Sterling tested an eight-month low against the dollar and dropped versus the euro on Wednesday after UK data showed retail sales fell at their fastest pace in at least 22 years, boosting expectations of a rate cut.
The Confederation of British Industry's monthly distributive trade survey showed a balance of -19, much lower than both economists' and retailers' own expectations and the lowest since the CBI's records began in July 1983.
This contrasted with Bank of England numbers showing UK consumer credit and mortgage lending rose more than expected in May, suggesting that consumers and the housing market may still have some strength left in them.
"The market focus is very much on the consumer side. There was a disproportionately large impact after the CBI data," said Steven Pearson, chief currency strategist at HBOS Treasury Services.
"People are more convinced that the BoE will deliver a series of interest rate cuts."
At 1420 GMT, sterling fell more than 0.7 percent versus the dollar to $1.8010, after falling to $1.7997 earlier, matching eight-month lows set earlier this month.
Against the euro, the pound fell about half a percent to 66.75 pence.
Sterling was at its lowest level in nearly two weeks on its trade-weighted index at 101.9, down 0.5 points from the previous close.
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