Sterling has plunged to its lowest level in nearly 18 months against the dollar amid renewed fears about the health of the British economy and growing conviction that the next move in UK interest rates will be down.

The pound slid 0.8 per cent to $1.9270 in currency markets this morning as traders reacted to a record monthly fall in house prices and continued concerns about consumer spending.

Economists added that, with little chance of an interest rate rise in the coming months, the pound could slide to $1.90 by the end of the year and 80p against the euro.

The Bank of England left interest rates unchanged at 5 per cent yesterday, as the European Central Bank (ECB) kept its borrowing rate at 4.25 per cent.

Jean-Claude Trichet, the ECB president, fuelled concerns about the global economy by stating that the risks for the eurozone were now tilted to the “downside”.

Economists fear the Bank of England’s inflation report next week will add to the gloom. David Buik, analyst at BGC Capital Partners, said: “The UK economy looks very brittle.”

The dollar climbed across the board, with the dollar index rising to its highest value in more than five months.

Traders said the greenback’s strength was more down to the weakness on other major currencies amid fears of a prolonged economic downturn.

Sharada Selvanathan, currency strategist at BNP Paribas, said: “We are seeing a shift away from a focus on the US to a more global problem. The dollar is getting a boost by default.”

The euro was down 0.7 per cent against the dollar at $1.5195, a five-month low.

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