But the pound remains close to 12-year highs above $1.95 against the struggling dollar and some analysts say that a two-dollar pound is on the cards in 2005.
"The two dollar pound is a possibility next year if the dollar continues to fall sharply," said Trevor Dinmore, foreign exchange strategist at Deutsche Bank.
"We are still focused on the euro heading higher to around 73 pence in 2005 as we expect rates to be cut in the second half. We are pricing in more economic weakness," he added.
The dollar has hit record lows against the euro for the last six trading sessions.
By 1150 GMT, sterling stood at $1.9308 on the dollar up a quarter percent from late levels in New York.
The pound traded at 70.67 pence per euro, up slightly on the day but still within striking distance of a 14-month low beyond 71 pence. The cross rate remains virtually unchanged on the year.
The pound had regained some of its footing against the euro on Thursday after data showed British consumer confidence improved unexpectedly in December while house prices slipped only marginally in the same month.
UK financial markets close early on Friday for New Year's Eve are shut for a full day on Monday.
Tuesday will see market players scan the release of consumer credit data and the Purchasing Managers' Index for Britain's manufacturing sector for clues on the state of the UK economy and future direction of interest rates.