LONDON: Sterling slipped to a 10-day low against the euro and a three-week trough against the dollar on Friday after data showed the expansion in Britain's services sector eased more than expected last month.
The purchasing managers index for the UK's services sector hit a three-month low, dropping slightly more than economists had forecast in a Reuters poll and raising the prospect of an end-of-year slowdown.
A broader index covering the whole of the private sector dropped to its lowest level in six months.
The pound fell 0.4 percent to $1.6070 after the data , edging closer to the 11-month low of $1.6052 hit on Sept. 10 amid worries about the referendum on Scottish independence.
The Bank of England expects Britain's economy to grow by 3.5 percent this year, but most of its policymakers have said they are in no rush to raise interest rates from their record low 0.5 percent, citing low inflation, high unemployment and very weak wage growth.
"The only way you're going to get sterling to put up a sustained fight against the dollar is to see expectations significantly shift towards the potential for a tightening this year," said Simon Smith, head of research at FxPro.
"Yes, there are two members voting for higher rates, but I still think there's a decently high hurdle to the Bank putting rates up this year." STERLING STRUGGLES
The pound had surged over 15 percent against the dollar in the year to mid-July on the expectation that the BoE would raise interest rates ahead of their peers in the United States and Europe.
But it has fallen over 6 percent in the 2-1/2 months since then as the expectation that the BoE would hike rates by the end of 2014 has faded and as political worries have grown.
Scotland's vote against secession has pushed constitutional change onto the agenda in Britain. Defections from the ruling Conservatives to anti-EU party UKIP have raised the prospect of a referendum on whether to take the country out of the European Union after next year's national election.
The euro strengthened to 78.605 pence after the PMI data, its highest since Sept. 23.
On Thursday the European Central Bank kept interest rates unchanged and gave no indication of whether the euro zone could yet see a programme of quantitative easing - effectively the printing of money to buy bonds - to boost the flagging economy.
The dollar was firm across the board ahead of US non-farm payrolls numbers due at 1230 GMT, but analysts said the greenback could be vulnerable to weak data.
"A softer than expected US labour report this afternoon could trigger a round of profit-taking.
Given the current positioning of the market, it is possible that sterling/dollar can recover some ground near-term towards the $1.63 level," Jane Foley, a currency strategist at Rabobank, wrote in a note.
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