Sterling fell one percent on the day to three-week lows against the dollar and also hit two-week lows against the euro on Thursday on weak UK data and talk of a large merger deal.
The Confederation of British Industry said its monthly manufacturing order books balance improved to -27 in September from -29 in August but still showed sharply falling orders. Economists had forecast a reading of -25.
The data turned the focus back to a possible cut in UK interest rates from the current 4.50 percent, after news in the previous session that the Bank of England Monetary Policy Committee voted 9-0 for steady rates in September.
"The data suggests that the situation in the manufacturing sector is not improving significantly," said Lorenzo Codogno, European economist at Bank of America.
"It is becoming increasingly clear that the economy will slow down more than people have anticipated and that is negative for the pound. There is a good chance we will see another rate cut in November."
Sterling fell to $1.7904 by 1430 GMT and was also down 0.7 percent against the euro at 67.98 pence. No major UK data is due on Friday.