The dollar surged to a six-month high against leading currencies today on concern over global economies' resilience against a major slowdown, while oil rebounded by more than $1 on supply fears following the conflict between Russia and Georgia.

Sterling fell to a 21-month low of $1.9124 against the greenback while the euro also retreated, declining further below $1.50.

Last week, the European Central Bank admitted that the eurozone economies had slowed more than expected.

The dollar continued to rise despite a small surge in oil prices as war between Russia and Georgia showed no signs of abating, despite the small region's pleas for a ceasefire.

Oil rose by $1 to $116.21 but is well below the $147.27 peak it touched a month ago on July 11.

The clash between Russia and Georgia has stopped oil shipments from two of the region's ports, while it has also emerged that some of BP's pipelines may have been attacked during hostilities.

The pound is forecast to take more pain this week as July inflation figures, due tomorrow, are expected to show that the Consumer Price Index has risen from 3.8 per cent to over 4 per cent — double the Government's 2 per cent target. The increase will rule out any hope of a cut to the UK interest rate in the short term. Last week, the Bank of England’s Monetary Policy Committee voted to keep borrowing costs at 5 per cent.

The Bank of England's quarterly inflation report on Wednesday is expected to cut its growth forecasts for this year and next.

The Bank is set to admit that inflation it now likely to hit 5 per cent this year, in line with last week’s forecasts from the International Monetary Fund.

New figures on unemployment, due out on Wednesday, are expected to show that jobless figures for last month are higher than forecast.

Unemployment is climbing at its fastest pace since the last recession.

More than a quarter of employers are now planning redundancies during the present quarter, up from just over a fifth in the previous three months, according to the latest quarterly report on the jobs market outlook from the Chartered Institute of Personnel and Development (CIPD) and KPMG, the accounting group.

One in four businesses is still intending to employ more staff during the third quarter, but CIPD's survey concludes that the overall national employment prospects indicated by its findings are the worst for four years.

The deteriorating employment outlook is emphasised by a survey today from the Royal Bank of Scotland (RBS), which suggests that numbers in work fell in every region of the UK last month, and at the fastest rate since late 2001, as most parts of the country suffered a fall in economic activity.

The steepest falls in employment levels were in Wales, the North East and the South West, with the jobs market holding up best in the South East, according to the monthly RBS regional purchasing managers' survey.

In the latest symptom of Britain's deepening economic woes, the RBS findings also show that private sector economic activity fell in 10 of 12 UK regions last month.

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