The pound fell off highs this morning after closely-watched figures showed activity in the manufacturing sector did not increase as fast as expected in January.
Markit's purchasing managers' index (PMI) for the sector fell to 55.3 in January, down from December's 56.2. Although any figure above 50 denotes growth in the sector, it was well below expectations of 56.5.
Sterling, which had at one point been trading 0.5 per cent up against the dollar, fell to $1.4240 on the news, 0.4 per cent higher.
Having risen as high as €1.1466 against the euro, the pound dipped to €1.1446 on the news.
Rob Dobson, director at IHS Markit, said slower growth and rising prices at the beginning of this year had contributed to the slowdown.
"Encouragingly, despite the slowdown, the latest survey is consistent with production rising at a solid quarterly rate of around 0.6 per cent in January, with jobs also being added at a faster pace," he said.
"However, output growth has slowed sharply since last November’s high, and the more forward looking new orders index has slipped to a seven month low. The trend in demand will need to strengthen in the near term to prevent further growth momentum being lost in the coming months."
Duncan Johnson, UK manufacturing industry leader at Deloitte, added: “In the short term, the weak pound will continue to strengthen export demand but businesses must consider how they respond to inflationary pressures, which are now building."