Sterling fell to seven-week lows on Tuesday after weak consumer spending data added to worries Britain's economy is slowing as it prepares to trigger divorce talks with the European Union. In the few months that followed Britain's vote to leave the EU last June, robust consumer spending had propped up the economy, surprising many economists.
But the weak pound - which has dropped nearly a fifth against the dollar since the referendum - has contributed to a jump in inflation, and Tuesday's data from the British Retail Consortium and Barclaycard indicated consumers may now be feeling the pinch.
Sterling fell to $1.2183 in morning trade in London, its lowest in seven weeks, before recovering a touch to $1.2196.
The pound also hit a seven-week low of 86.80 pence to the euro. It was last down 0.2 percent at 86.66.
"The run-up into the triggering of (Brexit talks) is having a negative impact, as have some of the recent data confirming a deceleration in growth in the first quarter of the year," said Stephen Gallo, currency strategist at BMO Capital Markets.
Mortgage lender Halifax also reported signs of a squeeze on consumers, as annual house price growth cooled to 5.1 percent in the three months to February, the weakest rise since July 2013.
Domestic political developments have also weighed on sterling in recent weeks, with talk of a fresh Scottish independence referendum, the collapse of Northern Ireland's government, and potential delays to Prime Minister Theresa May's Brexit plans all creating uncertainty for investors.
Britain's House of Lords will on Tuesday try to force the government to give lawmakers a greater say over the terms of Britain's EU exit and final approval of a deal.
The government is set to lose the vote though ministers are determined to overturn any changes before they become law. Britain needs to trigger "Article 50" to launch formal negotiations with the EU, and expects to do so this month.