The pound slid in late morning trading after a closely-watched index showed the UK's manufacturing sector was weaker than expected in September.
The pound was trading 0.7 per cent lower against the dollar, at $1.3306, in early trading, after IHS Markit's purchasing managers' index (PMI) for the manufacturing sector slid by a point in September, to 55.9.
The index indicated strong growth in the sector's output - any figure above 50 denotes growth - but was shy of expectations of 56.4, and well down on last month's 56.9.
IHS Markit said the survey suggested production and new orders were both above long-run average rate - but said costs were being pushed up by a combination of rising commodity prices, the exchange rate and increased supply-chain pressures.
"Although it looks as if the sector made solid progress through the third quarter as a whole, the growth slowdown in September is a further sign that momentum is being lost across the broader UK economy," said Rob Dobson, director at IHS Markit.
“On balance, the continued solid progress of manufacturing and export growth is unlikely to offset concerns about a wider economic slowdown, but the upward march of price pressures will add to expectations that the Bank of England may soon decide that the inflation outlook warrants a rate hike."
“The continued optimism reported in industry surveys will be positive news for the sector," added Duncan Johnston, UK manufacturing industry leader at Deloitte.
"However, the manufacturing economic output results for the third quarter, due later this month in the preliminary GDP estimate, will reveal more about the health of the sector which saw a decline in output in the second quarter.
"This will depend on factors such as actual fulfilment and value of orders, as well as cost pressures faced by businesses.”