Currency broker Caxton FX warns that parity between the pound and the euro could be reached as soon as next month.
The news comes as sterling plunged to fresh five-month lows against the currency used by 16 countries in the eurozone.
The pound fell to 1.11 euros in mid-morning trade before recovering to 1.107 euros in afternoon London trade.
Sterling took a battering this week after the Bank of England raised the possibility of a long-term fall in the currency's value as the credit crisis may put off foreign investors from buying UK assets. It has fallen 6% against the euro in one month.
The Bank of England's minutes for its September Monetary Policy Committee meeting will be closely examined by investors looking for clues on the weakness of the UK economy and for how long interest rates will have to remain at historic lows.
Low interest rates push down yields on Government bonds, making them a less attractive choice for investors.
"The UK is so led by the financial sector that any negative news means the pound plummets," says Caxton analyst Duncan Higgins.
"Investors have lost confidence in the UK economy and seen the fragility of the banking sector underlined," he adds.
Higgins believes parity is becoming more likely as a combination of concerns about quantitative easing, the state of the UK public finances and the Bank of England's negative statements have made sterling vulnerable.
Back in November last year, Caxton predicted parity by the end of 2009, due to the UK's deepening recession.
He says the influential German IFO business climate survey out later in the week, which is likely to show business confidence is continuing to improve in the eurozone's largest economy, will add to the downward pressure on the pound.
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