The pound fell to its lowest since July 2006 against the dollar to trade down to $1.8331, before closing at $1.8361, down from $1.8521, as last month’s UK mortgage app­rov­­als stayed close to their lowest level in at least 11 years.

Sterling’s poor performance pushed its trade-weighted value, measured against a basket of major currencies, to its lowest since October 1996.

Sterling was also put under pressure by a report showing German business confidence weakening in August.

This sent the euro falling to $1.4584, down from $1.4754, its lowest for more than six months against the greenback.

A eurozone move towards recession may weaken sterling further because it is the UK’s big­gest trading partner and export market.