The pound stumbled during the last 24 hours, losing ground against the euro amid signs of an interest rate cut.

This morning the euro was at 1.4564 against the pound and the dollar stood at 1.7232.

Consumer confidence in the UK dropped to a two-year low according to the GfK NOP survey, carried out for the European Commission.

A one per cent fall during December brought the figure down to -9, a figure not seen since the Iraq war in March 2003.

Now analysts' expectations of a rate cut in the new year are growing, with the pound set to face pressure from the dollar in the new year.

The dollar, meanwhile, is being tipped by some to fall 2006.

An end to the rate rises that characterised the Federal Reserve's decision in 2005 is anticipated, with rate rises across the world expected to dictate much of the currency markets' fortunes.

"The most eye-catching phenomenon as we head into 2006 is the transition in global monetary policy," Larry Kantor, chief market strategist at Barclays Capital in New York, told Dow Jones.