The British pound has dropped below $1.14 for the first time since 1985 as a combination of dollar strength and recession warnings weighed on the U.K.’s currency.Sterling fell as low as $1.135 at 8:50 a.m. London before rising slightly to $1.1378, marking a fresh 37-year low. It followed the publication of figures showing a 1.6% fall in August retail sales, which analysts at ING said showed a “deteriorating consumption picture in the UK”. Meanwhile, European markets were trading lower Friday as growth fears, expectations for further rate hikes and continued volatility in the energy market weighed on stocks.The pan-European Stoxx 600 fell 1%, with all sectors in the red.The U.K.’s FTSE 100 was flat, Germany’s DAX down 1.7% and France’s CAC 40 fell 1.8%.Many sectors were down 2% or more, including basic resources, construction, and industrials. Auto stocks fell 2.5% despite data showing a rise in new car sales in the European Union for the first time in 13 months.It comes off the back of three days of losses for European stocks, which have particularly dented energy and technology shares. However, banking stocks gained yesterday after Morgan Stanley analysts upgraded the sector.The World Bank yesterday warned of a global recession in 2023, and said central bank hiking may not be enough to bring down inflation.Asia-Pacific shares fell Friday, with the Shanghai Composite 0.96% lower, despite China’s industrial production and retail sales figures for August beating expectations.Analysts at ANZ said stocks and risk-sensitive markets would continue to struggle on inflation fears and expectations of Federal Reserve rate hikes next week.U.S. stock futures were also down Friday morning.