Sterling edged down against a basket of currencies on Monday, as investors focused on the risks to the UK economy of a potential "Brexit" from Europe and the prospect of interest rates remaining at their record lows until 2017.
The pound has lost 6 percent in as many weeks against the dollar as a slew of weak domestic data and worries over global growth have pushed back expectations for when the Bank of England starts raising rates. Jitters about a planned referendum on Britain's European Union membership, increasingly expected to happen this year, have also weighed.
Sterling's trade-weighted index was down 0.6 percent at 88.0, and the currency was flat against the dollar at $1.4270, up just 2 cents from the seven-year low of $1.4080 hit last week. Against the euro, the pound weakened by 0.25 percent to 75.92 pence, having touched a one-year low of 77.56 pence last week.
Bank of New York Mellon currency strategist Neil Mellor said warnings on the risks of a Brexit over the weekend at the World Economic Forum in Davos by IMF chief Christine Lagarde had again brought the issue to the forefront of investors' minds.
"The only question now is just how far sterling can fall, because inevitably when we get to these sorts of levels the market starts eyeing up the 2009 low down around $1.34 - below that there's nothing until right back to the 1980s," he said.
"You've got the perfect recipe going forward to keep on selling."
On Friday, mixed data showed UK government borrowing dropped sharply in December while retail spending suffered its biggest year-on-year fall in over six years.
Societe Generale analysts wrote in a note to clients that they would be staying short sterling, even though the currency might gain a little in the short term.
"Brexit fears aren't going to go away," they wrote. "The December retail sales told us nothing other than the UK seasonal data distortions are monstrous, but the UK MPC (monetary policy committee) is on hold for a long time and that makes any bounce temporary."
JP Morgan also recommended investors to put bets against the pound versus the Swedish crown, the euro and the US dollar.
The main data focus for sterling this week will be preliminary GDP numbers released on Thursday, are expected to show an acceleration in growth to a quarterly 0.5 percent.
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