Sterling slipped against the euro and US dollar after data revealed that Britain’s service sector had slowed more than expected last month.

Sterling dropped to $1.6019 against the dollar from around $1.6052 and against the euro fell to a day low of 87.53 pence, compared with 87.37 pence before the announcement.

Mark Bolsom, head of the UK trading desk at Travelex, said ‘This data will remind investors of the UK economy’s fundamental weakness and that any growth remains marginal. A double dip recession remains a distinct possibility.

‘Certainly the services sector did not expand as expected and we have not seen the roaring recovery that Labour promised early on at the beginning of the recession.’

He adds that, ‘With mixed data continuing to exacerbate investor concerns about the health of the economy, it is unlikely that they will be taking long-term positions on the pound for quite some time. All eyes remain on the Bank of England's decision tomorrow - however, we expect that sterling will still suffer even if quantitative easing is ceased, as the budget deficit looms over us.’