Sterling has fallen to a new record low against the euro on expectations of further rate cuts in the new year.
The pound now buys just 1.06 euros after Bank of England minutes released yesterday showed the monetary policy committee (MPC) considered cutting rates to one per cent.
The MPC believed a cut to one per cent would have made an impact on falling inflation but concluded a large reduction would have shocked the markets, weakening the pound even further.
Instead, it decided to cut rates from three per cent to two per cent.
Analysts expect the pound to reach parity with the euro soon, while holidaymakers paying commission on their currency are already seeing the pound falling below the euro.
Interest rate cuts in the US also sent the dollar tumbling against the euro, with one dollar now worth 0.685 euros.
The Federal Reserve slashed the interest rate to a range of between zero and 0.25 per cent earlier this week.
