RENEWED optimism about US and UK economic prospects pushed the euro down across the board yesterday, with the single currency sliding to its lowest level in four months against the dollar and weakening against the pound.

The euro broke through a series of key technical levels to drop as low as $1.0897, after a fall in US unemployment claims and a strong manufacturing report provided further signs of improvement in the American economy.

The single currency also dropped to a five-week low of 69.28p against sterling on hopes of a bounceback in the UK. Analysts said that it was now clear that the Continent was failing to share in the global economic recovery, depressing the euro’s value.

Recent figures from the eurozone have been deeply disappointing, with France now close to joining Germany, Italy and the Netherlands in recession. However, in the UK and, in particular, the US, there are growing signs that economic activity is improving.

Figures out in the UK yesterday showed that sales on the high street were stronger than expected during July. Retail volumes were down 0.4 per cent on the month, but up 4.4 per cent on the year. Analysts had been expecting a sharper monthly fall in retail sales after June’s strong figures.

Separately, a new survey from the CBI revealed a modest improvement in the manufacturing sector, although the employers’ organisation gave warning that any industrial recovery was likely to be patchy and fragile.

The tentative pick-up in industry was not nearly strong enough to stop the CBI cutting its forecasts for growth this year from 2.1 to 1.8 per cent. Growth next year is likely to be 2.4 per cent, substantially below the Treasury’s forecast of 3 to 3.5 per cent.