Sterling fell further against the euro this morning as parity between the pound and the single currency edged closer amid continuing concerns about the strength of the British economy.

This morning, €1 cost 87.9p, an increase from yesterday’s close of 87.74p and 34.4 per cent off sterling's peak against the single currency in 2000 when one euro was worth 57p.

The strength of the euro against sterling has been boosted by concerns about the state of the UK economy.

The Treasury was last night unable to rule out pumping more money into the economy and the possibility of interest rates hitting zero is becoming increasingly likely.

Economists have warned that the economy could shrink by one per cent this winter as the credit markets freeze, house prices continue to fall and consumers cut spending.

Despite comments from Juergen Stark, an executive board member of the European Central Bank (ECB), admitting that the bank has little room to cut interest rates further after last week’s cut, the euro was still up against the pound.

The market is waiting for comments from Jean-Claude Trichet, president of the European Central Bank, who will speak at around 8am (GMT) this morning, for clues on future interest rate moves.

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