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Last Updated: Tuesday, 15 January 2008, 13:37 GMT
Pound falls to fresh low on euro
Pound notes
A weaker pound will raise costs for Britons travelling abroad
The pound has fallen to a fresh all-time low against the euro on growing expectations that the UK will cut interest rates next month.

In early Tuesday trading, it took as much as 76.135 pence to buy a euro, although this later improved to 75.58p in afternoon trade.

Amid signs of slower UK economic growth, the Bank of England is tipped to cut UK rates to 5.25% in February.

The benchmark rate was cut in December, but kept on hold at 5.5% this month.

'Room to cut'

The call for a second rate cut after December's reduction from 5.75% to 5.5%, has come most strongly from retailers, such as Marks & Spencer, after seeing poor festive sales figures.

According to the British Retail Consortium, UK retailers experienced their worst Christmas in three years.

With official data showing on Tuesday that UK inflation remained unchanged in December at 2.1% for the third successive month, analysts say the Bank has the room to reduce rates in February.

Against the dollar, the pound remains stronger, rising to $1.9673 from $1.9576 earlier in the day.

This is because the Federal Reserve is also widely expected to cut US interest rates, and more dramatically than the Bank of England.

A weaker pound against the euro will make travel to the continent more expensive for British holidaymakers.

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