Sterling has hit a near-ten year low against the euro after data unexpectedly showed that British gross domestic product contracted in the second quarter for the first time since 2012.
The pound fell to 92.9p against the euro in early evening, passing the low recorded in the aftermath of the 2016 Brexit vote.
It is also the weakest sterling has been against Europe's single currency since October 2009, when it briefly hit 93.5p to the euro.
New data from Britain's Office for National Statistics today showed the country's economic growth falling at a quarterly rate of 0.2% in the three months to June, below all forecasts in a Reuters poll of economists that had pointed to a flat reading.
Year-on-year economic growth slid to 1.2% from 1.8% in the first quarter, its weakest since the start of 2018.
Against the US dollar sterling fell to 82.5p, its lowest point since January 2017.
A report in the Financial Times that Prime Minister Boris Johnson was planning to hold a parliamentary election in the days after Brexit if lawmakers sink the government with a no-confidence vote has also weighed on the pound.
It is growing increasingly likely that Mr Johnson will face a vote of no confidence soon after 3 September, when parliament returns from its summer recess, analysts say.
Mr Johnson says Britain must leave the EU on schedule on 31 October, with or without a deal with the bloc. Delaying an election until after Brexit could be a tactic to ensure that happens even if parliament withdraws support for his government.
Vasileios Gkionakis, global head of forex strategy at Lombard Odier, said he was worried about a general election, but also said he was ready to unload some of the sterling shor tpositions he had accumulated a couple of months ago because a lot of bad news had been already priced in the pound.
"If no-deal (Brexit) increases in probability, then of course sterling would be a sell, but until then I'm becoming a bit more neutral," Mr Gkionakis said, adding that he expects sterling to "settle around $1.20" before market participants reassess their expectations of Britain crashing out of the European Union without a divorce deal in October.
After becoming prime minister last month, Mr Johnson said he was looking to negotiate a deal with the EU, but he also demanded that Brussels remove key elements of the deal agreed with his predecessor. The EU has repeatedly said it will not reopen the negotiations.
The pound was the second-worst performing currency in developed markets since Mr Johnson became prime minister on 24 July.
Weaker growth in the second quarter has failed to boost investors' expectations that the Bank of England will cut interest rates in September, but some economists expect the central bank to soon embark on more easing.
"As uncertainty continues to loom over the UK economy, the difficult run of data is expected to continue and the BoE will need to consider its next step carefully as its global peers embark on further rate cuts," said Geoffrey Yu, head of the UK Investment Office at UBS Wealth Management.
Money markets are pricing in a 25 basis points cut by January next year.
