Sterling touched a two-and-a-half year low against the dollar at one stage on worries about the health of the UK economy.

Australia’s central bank’s shock decision to cut its interest rate by 1 per cent to 6 per cent fuelled speculation the Bank of England could cut its rate from 5 per cent to at least 4.75 per cent and possibly 4.5 per cent.

The pound fell to $1.7322 but recovered to a rise of nearly 1 cent at $1.7531 as the dollar weakened on Federal Reserve plans to calm jittery U.S. financial markets.

Against the euro, sterling was down to 77.81p.

EXPRESS CITY: IN-DEPTH ANALYSIS OF THE FINANCIAL CRISIS