The pound fell back below $1.30 after figures showed output in the UK's manufacturing sector fell well short of expectations in June.
The pound was 0.4 per cent lower against the dollar, at $1.2974, after Markit's purchasing managers' index (PMI) for the manufacturing sector dropped to 54.3, down from 56.3 in May and way below the 56.5 expected.
However, the figure was above 50, any number below which denotes a contraction, for the 11th month in a row.
Markit said June's survey pointed to a "broad-based slowdown", with both output and new orders rising at slower rates across the consumer, intermediate and investment goods sectors.
Meanwhile, increase in new work volumes fell to their weakest in the 11 months of gains - and although manufacturers have made the most of weak sterling in recent months, they reported growth in new export business had also slowed.
“Although the sector should still improve on its lacklustre opening quarter performance, this will be to a lesser extent than hoped for after solid growth in April and May. The main factor driving the broad slowdown in June was a steep easing in the rate of increase in new order intakes," said Rob Dobson, senior economist at IHS Markit.
“While the survey data add to signs that the economy is likely to have shown stronger growth in the second quarter, further doubts are raised as to whether this performance can be sustained into the second half of the year.”