Sterling has fallen to a new 37-year low against the dollar, as a sharp drop in British retail sales heightened recession fears.
The pound fell more than 1% to $1.1350, and has lost 0.5% against the euro to €1.1407.
“The sharp selling pressure seen at the beginning of the week has eased somewhat, as traders await the next major move lower in anticipation of a potential 100-basis point hike from the Fed,” Joshua Mahony, senior market analyst at online trading platform IG said.
Olivia Cross, assistant economist at Capital Economics, said August’s retail sales figures backed up the consultancy’s view that the UK economy is “already in recession”.
“Retail sales will probably continue to struggle as the cost of living crisis hits harder in the coming months,” Ms Cross said.