The British pound plunged on Wednesday as dealers ruled out a rise in British interest rates soon after a downbeat economic outlook from the Bank of England.
In morning trading here, sterling slid to 1.1132 euros from 1.1189 euros late in New York on Tuesday.
Sterling dropped to 1.5199 dollars from 1.5272 dollars late Tuesday.
"The Bank of England (BoE) are not buying the 'it's all over' mood (for the global recession) that seems to be sweeping over investors and market pundits," said ING Financial Markets economist Rob Carnell.
The BoE said on Wednesday in its latest quarterly assessment of the economy that the outlook for British economic growth and inflation is "unusually uncertain."
Carnell added: "The key phrase in their latest inflation report was 'It is more likely than not, that CPI inflation will be below the two percent target in the medium term' which indicates that there will be no end to the current policy of credit easing any time soon, and that rates will be kept low for the foreseeable future.
Last week, the Bank of England decided to keep interest rates at a record-low 0.5 percent as Britain battles its sharpest slowdown in 30 years.
It agreed also to pump out another 50 billion pounds (75 billion dollars) of new money to boost bank lending following the crippling credit crunch.
The move to increase the new money supply to 125 billion pounds to boost bank lending is a form of monetary policy known as 'quantitative easing' or QE.
Under QE, the British central bank buys government bonds from commercial banks in the hope that the institutions will use the money to lend once again to businesses and individuals.
The dollar remained under pressure against the euro and yen as traders fretted over a warning that the United States may lose its triple A credit rating.
Markets were waiting for the latest snapshot of activity in US malls due Wednesday. Core retail sales, which exclude auto purchases, may rise 0.2 percent in April from the previous month, analysts forecast.
In trading here, the euro was changing hands at 1.3673 dollars against 1.3649 dollars late on Tuesday, at 131.55 yen (131.61), 0.8997 pounds (0.8938) and 1.5065 Swiss francs (1.5090).
The dollar stood at 96.28 yen (97.50) and 1.1018 Swiss francs (1.1056).
The pound was at 1.5199 dollars (1.5272).
On the London Bullion Market, the price of gold rose to 926.60 dollars an ounce from 917 dollars an ounce late on Tuesday.
