Exporters could face further competitive pressure in UK and US markets at the end of the year, as both the dollar and sterling are likely to weaken against the euro, a leading economist warned yesterday.

Mr Niall Dunne, chief economist at Ulster Bank Financial Markets, said in an economic outlook published yesterday that while the British economy looked set for a recovery, the Bank of England wanted to keep sterling at or below current levels to maximise economic growth.

He warned exporters that despite the improving climate in Britain, they should not expect the euro to weaken further against the pound.

Mr Dunne said that Ulster Bank expected the euro to reach 73 pence sterling.

It traded around 69p yesterday and was in the 68p to 70p range in recent weeks. The pound opened the year at around 62p.

"It is certainly not likely to recover to that level," Mr Dunne told The Irish Times yesterday. "The Bank of England has already sent signals to the market that it was happy with a lower range against the euro. Britain has a balance of trade problem, and a weaker pound would help that."

Mr Dunne said this fact combined with a likely further weakening of the dollar would push the euro past the 70p mark.

He suggested the US Treasury would allow the dollar to weaken in a bid to stimulate domestic growth.

He argued that a weaker dollar would make imports into the US less competitive and boost demand for the country's exports.

"Ulster Bank expects that the euro will end 2003 trading in the $1.13 range against the dollar, and anticipates further dollar weakness in 2004," he added.