The pound fell to a 31-month low on Friday, as the latest UK economic growth figures showed an unexpected contraction in the second quarter.
But even the currency’s slump could not lift the FTSE 100 – which usually benefits from sterling’s weakness – as the global economic mood darkened.
The pound was trading as low as 1.206 US dollars around lunchtime, before ending the day just under 1.208 dollars, down 0.54%.
This was its lowest level since January 2017.
The pound was also 0.7% lower against the euro at 1.077.
It followed data showing the UK’s first negative quarter of gross domestic product (GDP) since 2012, with a decline of 0.2% between April and June.
Fiona Cincotta, senior market analyst at City Index, said: “The outlook for the pound remains extremely fragile as the prospect of a no-deal Brexit increases.
“With the blame game between the EU and the UK in full swing, the chances of the two sides renegotiating the Irish backstop appears slim; instead preparations for a worse case scenario, no-deal Brexit are being prioritised.”
Nevertheless, the FTSE 100 closed down by 32.05 points, or 0.44% lower, at 7,253.85.
David Madden, market analyst at CMC Markets UK, said the prospect of an election in Italy had rocked stock markets around Europe.
“The third largest eurozone member has a fragile banking system, and the country has a massive national debt, and a new election is likely to destabilise the nation,” he said.
“Adding to the declines are the strained relations between the US and China, as President Trump claimed he ‘won’t be doing business with China’. The US-China trade spat has a technological element to it, and Beijing won’t like the latest development, so the uncertainty is likely to spill over into next week.”
In London, William Hill saw half-year profits cut by almost half after the bookmaker was hammered by the Government crackdown on fixed-odds betting terminals.
But shares jumped 9.5p as investors cheered prospects for US expansion.
Security contractor G4S said it plans to split off its cash-handling business and focus on its main security operations.
The move is to be carried out by the first half of 2020. Shares inched up 1.45p to 185.15p.
On the Beach Group issued a profit warning after the package holiday firm was hit by the plummeting value of the pound amid the risk of a no-deal Brexit.
Shares were down 63.4p to 384p.
Advertising firm WPP led Friday’s FTSE 100 firms as its shares jumped 66p to 981p after it performed ahead of analyst predictions.
Investors cheered the beleaguered firm’s revenue performance as its major turnaround programme gathered pace in the second quarter.
Drugs giant AstraZeneca saw shares push 124p higher to 7,351p after it told investors that its top-selling drug, Tagrisso, had significantly helped patients with a specific type of lung cancer live longer without the disease worsening, following new testing.
The biggest risers on the FTSE 100 were WPP up 66p to 981p, Next up 158p to 6,016p, Segro up 13.8p to 763.6p, and AstraZeneca up 124p to 7,351p.
The biggest fallers on the FTSE 100 were Evraz down 54.8p to 562.8p, Antofagasta down 40.4p to 829.2p, NMC Health down 72p to 2,023p and ITV down 2.75p to 107.8p.