The pound fell further ahead of a key Brexit summit in Brussels on yesterday, while equities investors tried to come to grips with an unexpectedly dovish message from the US Federal Reserve.
Sterling, seen as a barometer for Britain's long-running Brexit saga, remained on the backfoot over fears that the country could crash out of the EU without a deal continued to fester.
The London's benchmark FTSE 100 index rose 0.5 per cent, buoyed by news that official UK retail sales rose 0.4 per cent in February from the previous month.
In eurozone early afternoon trade, the Paris CAC 40 stocks index shed 0.2 per cent and Frankfurt's DAX 40 slid 0.5 per cent, as uncertainty prevailed ahead of the hotly-anticipated Brexit summit.
British Prime Minister Theresa May was back in Brussels on a last-gasp mission to beg EU leaders for more time to deliver a Brexit deal that was twice rejected by her own parliament.
May has declared that she is “determined” to deliver Brexit, after formally requesting a three-month delay on Wednesday.
However, investor fears persist that the 27 other EU leaders could refuse the request, potentially sending Britain crashing out of the bloc in just eight days' time.
The pound fell as low as $1.3106 in midday trading.
“If the European leaders decide that they need more time ‒ possibly a week ‒ to respond to May's request then the pound will travel south towards the $1.30 support as uncertainty will again soar," warned analyst Konstantinos Anthis at trading firm ADSS.
The Bank of England (BoE), as expected, held its main interest rate steady at 0.75 per cent.
Sentiment on equities markets was hit after the Federal Reserve forecast overnight that it would not raise US borrowing costs this year ‒ a shift from an earlier projection of two hikes ‒ and cut its annual growth outlook.
European markets were mostly down in afternoon trading and Wall Street opened lower.
“US stocks are under some early morning pressure as the Fed unexpectedly reflected an easier policy stance yesterday and warned that too-low inflation is one of the major challenges of our time,” said analysts at Charles Schwab brokerage.
Investors were also spooked after US President Donald Trump dashed hopes on Wednesday for a quick resolution to the China-US trade talks by warning tariffs would stay in place for some time after any agreement is reached.
Most stock markets in Asia rose, with Shanghai 0.4 per cent higher, while Singapore added 0.2 per cent, Seoul climbed 0.4 per cent and Manila jumped 1.2 per cent. Sydney, Taipei, Bangkok and Jakarta also rose though Hong Kong reversed course in the afternoon to close 0.9 per cent lower.