Pound hits record low vs euro

LONDON (Reuters) - Sterling hit a record low against the euro on Monday as investors worried over a bleak economic outlook and prospects of more monetary policy easing after the Bank of England's dramatic interest rate cut last week.

The euro briefly hit a lifetime high of 82.08 pence, according to Reuters data, exceeding a previous high of 81.95 pence.

On a trade-weighted basis, sterling matched a 12-year low of 84.8.

Traders had been prompted to test euro highs against sterling after UK interest rates fell below those of the euro zone last week for the first time since the single currency's inception in 1999.

The Bank cut key interest rates by a whopping 150 basis points on Thursday, bringing rates to 3.00 percent before the European Central Bank delivered a more modest 50 basis points to bring its rates to 3.25 percent.

Data on Monday showed UK price pressures easing, offering the Bank room to cut further to stave off a prolonged recession.

Given signs that price risks are dissipating, markets will focus this week on the BoE's Inflation Report on Wednesday for hints of the possible scale and timing of further rate cuts.

"Expectations for a dovish Inflation Report and expectations of more rate cuts will keep pressure on sterling," said Paul Robinson, chief sterling strategist at Barclays Capital in London. "But the pound is also low by historical norms."

Sterling also erased gains against the dollar. The UK currency was flat at $1.5668, off from a session high of $1.5884, according to Reuters data.