Sterling takes a pounding against the dollar as markets wobble

Travellers heading to the States at the moment will get less than $1.75 for their pound at foreign exchange bureaux.

Sterling's troubles were reflected in the stock market, where the blue-chip FTSE 100 closed 121.4 to 5240.7 at 16.30 BST, after bad US jobless figures this afternoon added to stock traders' anxiety. The Footsie saw its worst week's trading since July 1997.

The OECD was the latest to forecast a UK recession this week, citing the 'wealth effect' of the depressed housing market as the main reason for its pessimistic outlook.

Shocking figures from the Halifax yesterday showed UK house prices are plunging by an annual rate of 13% - much faster than than in Germany and France, where prices have remained largely flat or marginally negative over the past year.

Panic: Currency traders had a tough time today as the pound fell heavily against the dollar and world markets wobbled

However, fresh fears that tightening in credit markets threatens to push Continental economies further into recession also hit the euro, which at $1.4267 had lost nearly a full cent against the dollar since yesterday.

Anxiety over the state of euro-zone economies was raised yesterday by bearish comments from Jean-Claude Trichet, the president of the European Central Bank (ECB).

The ECB tightened its criteria for exchanging assets with Europe's cash-strapped banks yesterday, prompting worries that another financial services provider might spiral into crisis as lenders find it hard to secure capital from the wholesale markets.

Both the ECB and the UK's Bank of England kept their interest rates on hold yesterday, despite sustained predictions that economic growth was stagnating.