Sterling fell against the dollar but rose against the euro on Thursday as eagerly-awaited figures on British retail sales were overshadowed by the greenback's broad-based recovery. British retail sales rose 0.2 percent last month, as expected, but back revisions over the key Christmas shopping period left sales down 0.6 percent on a three-month basis. This was the weakest three-month performance since March 2003 when the run-up to the war in Iraq dented consumer sentiment.
Before that, retail sales had not declined on a three month basis since August 1998. "The retail sales figures for February confirmed that high street spending is on a sharply slowing trend," said Vicky Redwood, economist at Capital Economics, adding the data supported her view that interest rates will fall later this year.
However, many in the market reckoned the Bank of England was still likely to raise rates in the next three months and sterling eased only marginally after the data.
The Bank of England has left interest rates unchanged at 4.75 percent for the past seven months after five quarter-point hikes between November 2003 and August 2004.
Sterling was down 0.25 percent at $1.9220 but up 0.25 percent at 69.46 pence per euro at 1500 GMT.
In the broader market, the dollar staged a comeback against the euro after tumbling on news of a record US current account deficit on Wednesday.