Sterling fell on Tuesday as British data did little to change the view that inflation is rising and growth is slowing, and on expectations of euro zone and US rate hikes. Sterling was unable to capitalise on data showing retail sales grew at their fastest pace in four months and output unexpectedly rose.
The figures did little to alter the grim outlook held by BoE Governor Mervyn King, who in a speech on Tuesday said that growth is slowing while prices rise, while the financial market crisis is not over yet.
His comments came after Federal Reserve Chairman Ben Bernanke and his European Central Bank President Jean-Claude Trichet, sounded hawkish in speeches late on Monday, bolstering expectations for rate hikes in both countries.
By 1354 GMT, sterling was down more than 1 percent at $1.9539. The euro added 0.2 percent to trade at 79.37 pence.