Today’s slump marked the seventh consecutive day of falls for the pound since the Bank of England slashed the base interest rate to 0.25 perent last Wednesday. At noon today the pound was at its lowest against the dollar for 35 years.
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Investors fled from UK assets amid fears Boris Johnson’s response to the crisis in the UK has fallen short compared to measures taken by other European nations.
Sterling has also suffered due to heightened global demand for the greenback, with a gauge of dollar strength up for a seventh session.
Neil Jones, head of foreign-exchange sales to financial institutions at Mizuho Bank: “A combination of the safe haven dollar bid, the global asset sell-off and liquidation of long positions from the election are all weighing on the pound.”
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The pound has fallen to its lowest level against the dollar for 35 years (Image: GETTY)
Sterling fell as much as 1.9 percent to $1.1828, plunging even deeper than the lows it recorded in the aftermath of the 2016 Brexit vote.
It was last lower in 1985, when the world’s richest nations signed the Plaza Accord to weaken the dollar and haul the US economy out of a recession.
But despite the slump analysts at UBS believe the UK will make up some ground in coming months.
Thomas Flury and Dean Turner, of UBS Global Wealth Management, said: “The level of fiscal-monetary coordination by the UK government and the Bank of England strengthens our conviction that sterling is set for a rebound once the global economy stabilises.”
UK stocks have also tumbled (Image: GETTY)
Experts said the pound had nosedived because traders had been switching from sterling to other major currencies as the markets assessed the wide-ranging economic impacts of the coronavirus pandemic.
The US Federal Reserve has relaxed the terms on which it provides currency swaps to five of the world’s major global central banks, making it easier for them to provide dollar funding to financial institutions.
UK stocks also suffered a torrid morning as makor stimulus plans on both sides of the Atlantic failed to ease fears about the economic impact of the coronavirus pandemic.
The FTSE 100 index of top UK firms dived more than 5 percent, with aerospace firms, travel companies and housing firms leading the declines.
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Alongside the pound and stocks, UK sovereign bonds plummeted after the Government announced a rescue package for businesses in an attempt to stop the coronavirus wrecking the domestic economy.
Analysts said banks had been caught out after being bullish on sterling, with a median estimate compiled by Bloomberg forecasting the pound at $1.30 by June.
Option markets indicate a less optimistic picture, with traders going from neutral on its prospects to the most bearish since the December election.
Coronavirus has quickly spread around the world with more than 200,000 confirmed cases worldwide.
There are 1,950 confired cases in the UK and a death toll of 71.