The Market/CIPS UK Services Purchasing Managers' Index (PMI) slipped more than expected to 56.7, from 57.2 in January, and well below the Reuters forecast of 57.5.
Sterling dropped to the day's low against the dollar at $1.5337, from around $1.5357 before the data was released.
The pound pared gains against the struggling euro to trade at 72.52 pence per euro, compared with 72.45 pence beforehand.
The euro had earlier dropped close to its lowest in over seven years of 72.38 pence as traders geared up for the European Central Bank's asset buying programme, which is due to begin this month.
June gilt futures inched up to a session high of 117.82 but then retreated and were little changed from levels before the data of 117.78.