Sterling weakened today after inflation fell more than expected in September, easing a squeeze on UK consumers, who are also seeing the strongest wage growth for workers in a decade according to other data.
The better-than-expected wage figures earlier this week had pushed the pound higher.
The wages data also briefly redirected attention to the UK economy and away from Brexit negotiations and this week's European Union leaders' summit.
But weaker-than-expected consumer price data, which came in at an annual rate of 2.4% in September compared to forecasts of 2.6%, pushed down a pound already weakened by a report that Britain would not seek to extend the Brexit transition period.
The pound, trading down 0.3% at close to $1.3150 before the inflation data was released, fell to as low as $1.3125.
Against the euro, sterling dropped to 88.06 pence, down 0.3% on the day.
The Bank of England has said tighter monetary policy depends on Britain agreeing a trade deal with the EU.
But it also wants to see signs of more wage growth, which could feed through to inflation.
Analysts say Britain will need to see a period of strong wage growth before the Bank of England begins to act.
The pound, although relatively stable in recent days, remains at the mercy of the negotiations - this week's EU summit was supposed to herald a breakthrough in talks for a deal with Britain to shape future trading relations.
But EU leaders are set to give Prime Minister Theresa May a tough reception in Brussels, warning her to rally support at home for the Brexit deal on offer or be cut loose without one in March.
