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Sterling slipped below $1.27, its weakest level since June 2017, as the dollar extended its recent rally and investors prepared for British inflation data due on Wednesday.
After falling to as low as $1.2693 in Asian trading, sterling recovered to $1.2710, down 0.1 percent on the day against a broadly stronger dollar.
Against the euro, the pound rose 0.2 percent to 89.05 pence per euro.
Year-on-year consumer price inflation, due at 0830 GMT, for the month of July is expected to show a rise of 2.5 percent, according to a Reuters poll, up from 2.4 percent in the previous month.
The pound languished near 13-month lows on Monday, as investors bet on continued dollar strength and uncertainty over whether Britain would secure a trade deal with the European Union before it exits the bloc.Sterling lost 2 percent of its value last week because of growing unease among investors that Britain was headed for a future where it lacked an established relationship with its largest trading partner, the EU.On Monday, the British currency dropped 0.3 percent to a low of $1.2735, a fraction higher than Friday's 13-month low.Turkey launches probe into suspected actions targeting economic securityThat move was roughly in line with the dollar's rise against a basket of major currencies, fueled by investors rushing into safer assets on fears of market contagion from a dramatic slide in the Turkish lira.Strong employment or inflation data -- both reports are due this week -- are unlikely to help the pound significantly, analysts said.Chinese to boycott US products if trade war intensifiesThat is because of political uncertainty over Brexit and the fact markets are not pricing in another Bank of England interest rate increase until at least next year."The uncertainly of a ‘no-deal Brexit’ is likely to weigh on the pound, and traders could remain cautious until there is more clarity around the UK’s plans post leaving the EU," said Societe Generale analyst Guy Stear.Against the euro, the pound has held up better as demand for dollars has held back the euro.The pound traded up 0.1 percent to 89.28 pence per euro , above its recent 2018 lows of 90.30 pence.Brexit: Over 100 UK seats ‘switch’ from Leave to RemainSterling has been pushed lower as investors rush to protect themselves from further weakness in the run-up to Britain's exit from the EU next March. Most investors still expect Britain to secure a trade deal with the EU, but the risk of no deal is rising.Warnings this month from Bank of England Governor Mark Carney and trade minister Liam Fox, that the prospect of a no-deal Brexit was growing, triggered the recent slide.
Sterling stuck near 2018 low on dollar strength, Brexit woes