"The figures were weaker than expected. It's consistent with the inflation data (published on Tuesday) which showed that the upside in prices is not because of strong demand," said Paul Robinson, chief sterling strategist at Barclays Capital in London.
At 1451 GMT, the euro had climbed more than 0.8 percent on the day to a session high of 87.74 pence. Sterling losses accelerated after it broke through the 87 pence region, market participants said. Despite Friday's gains, the euro stayed in range of a five-month low of 86.50 pence hit earlier in the week as concerns about Greece's debt burden continued to sting the single European currency.
The pound was hit by broad selling, with traders citing UK banks dumping it against the euro and the dollar. Sterling traded at $1.6095, down 0.6 percent and roughly 2 cents off the day's high of $1.6285. The pound hovered under its 200-day moving average around $1.6183 for a second day. A sustained break below the average may spell more sterling weakness, some in the market say.
Analysts said selling momentum for sterling picked up after it made a sustained break below $1.62. The pound reversed a rally earlier this week, when it hit a six-week high against the dollar after strong UK inflation and housing market data boosted optimism the economy is improving.