Sterling retreated from a one-month high against the dollar and slipped versus the euro on Wednesday, after lacklustre factory activity data and on a potential decline in the pound's interest rate advantage.
British factory orders declined at a slower place in October, but domestic orders in the last quarter deteriorated at their fastest rate in two years, a Confederation of British Industry survey showed.
The CBI's orders balance rose to -25 from -27 in September, as predicted by economists.
"They were pretty much in line with expectations and don't really change the interest rate debate," said Mitul Kotecha, head of foreign exchange at Calyon.
Recent comments from Bank of England policy makers have cooled speculation that the central bank is poised to cut interest rates from 4.5 percent after lowering the cost of borrowing for the first time in two years in August.
By 1350 GMT, sterling was down 0.4 percent against the dollar at $1.7772 after hitting a one-month high on Tuesday of $1.7867.
The pound traded at 67.95 pence per euro, down around 0.15 percent.
The pound faltered against the euro as hawkish comments from European Central Bank officials raised the prospect of an interest rise in the euro zone before the end of the year.
A rise in euro zone rates from 2.0 percent would eat into the pound's interest rate advantage over the single currency. The cost of borrowing in the United States is also on the rise.