London Daily

Focus on the big picture.
Saturday, Feb 22, 2025

Pound plunges to its lowest level in over 30 years

Pound plunges to its lowest level in over 30 years

The pound has fallen to its lowest level against the dollar since 1985, as the spread of the coronavirus pandemic spooks investors.

It is currently trading at $1.15, a fall of almost 5% in just one day.

It comes as financial markets tumbled again after major stimulus plans failed to quell fears about the economic impact of the virus.

The Dow ended down 6.3%, while the S&P 500 fell 5.1% and the Nasdaq dropped 4.7%.

Earlier the Dow and S&P 500 had plunged more than 7%, triggering an automatic temporary halt to trade, but shares recovered some ground as Congress appeared set to approve a relief bill.

The pound's weakness could partly stem from questions over how the UK government plans to pay for the emergency economic measures it has introduced, says Neil Wilson, chief analyst for Markets.com.

"This is the worst sustained period of sterling selling that I can recall," he says. "The government's massive fiscal package undoubtedly means more borrowing for the UK economy - how do we pay for all this?"

Meanwhile, the FTSE 100 index of top UK firms closed down 4%, with aerospace and travel firms among the hardest hit.


'Economic fight'

UK Chancellor Rishi Sunak revealed a £350bn stimulus package for UK firms on Tuesday, including £330bn of business loan guarantees.

It included aid to cover a business rates holiday and grants for retailers and pubs, while help for airlines is also being considered.

Despite this, investors are still flocking to the comparatively safer dollar, says Ranko Berich, head of Market Analysis at Monex Europe.

"The UK's response to the incoming coronavirus shock has been about as aggressive as possible in terms of monetary and fiscal policy, but this has done nothing to help sterling.

"Idiosyncratic factors such as the UK's monetary and fiscal response or Brexit are beside the point: this is about the US dollar, which is proving unstoppable as global financial markets stare into the abyss of crisis-like conditions," he said.

Investors say rescue measures can only blunt the pain, as countries close borders and order mass closures, bringing most economic activity to a halt.

The US on Tuesday outlined a $1tn (£830bn) proposal to support the world's biggest economy, which is expected to include direct payments to families, small business assistance and bailouts for airlines and other industries.

In the US, large companies have already announced more than 3,600 job cuts or furloughs, according to research firm Challenger, Gray & Christmas. The firm said some nine million other jobs at local bars and restaurants could also be at risk.

Car factories in the UK and elsewhere have halted production, while the slowdown has pushed other firms such as Laura Ashley and Flybe into administration.

Concerns about the damage have spurred a widespread sell-off. France's CAC 40 fell more than 6% while Germany's Dax dropped more than 5%.

Oil prices also plunged to levels not seen since the early 2000s, as demand contracts sharply, but exporters boost supply. The declines have even hit gold and government debt, which are typically considered less risky assets.

Asian markets have fared better than the US and Europe in recent days, but were also lower. Japan's benchmark Nikkei 225 ended Wednesday 1.7% lower, the Hang Seng in Hong Kong fell by 3.3%, and China's Shanghai Composite lost 1.8%.

Sterling's fall to a 35-year low against the dollar is clearly troubling.

It is down 12% since the beginning of last week, and 5% today alone. This is partly down to the strengthening dollar, due to its status as a "safe haven," the inevitable result of global volatility in financial markets amid the Coronavirus pandemic.

But those aren't the only reasons for sterling's weakness. The pound has sunk to to just over €1.06 against the euro- its lowest level since the depth of the financial crisis 11 years ago.

The pound is likely to be at a record low on measures of its global value, to be calculated tomorrow.

At the same time, UK government borrowing costs are creeping up, with the presumption these would stay "lower for longer" now being tested in global debt markets.

Traders have raised a range of reasons for why the UK is being particularly singled out for attention.

There is growing expectation of ever bigger fiscal injections to combat the economic impact of the pandemic and the UK is still very dependent on foreign flows of capital.

Its strategy for dealing with the pandemic was seen, say traders, as an outlier amongst the world's major economies.

Then there is Brexit. The UK has the extra economic challenge of dealing with a fundamental change to trading arrangements with the EU, perhaps on WTO tariffs, in the middle of this pandemic.

It is a very rough market out there, with some markets a little dysfunctional as traders are isolated away from their trading floors. But the UK is being singled out for especially tough treatment.

Newsletter

Related Articles

0:00
0:00
Close
UK Prison Officer Sentenced for Inappropriate Conduct with Inmate
Good News: Senate Confirms Kash Patel as FBI Director
Officials from the U.S. and Hungary Engage in Talks on Economic Collaboration and Sanctions Strategy
James Bond Franchise Transitions to Amazon MGM Studios
Technology Giants Ramp Up Lobbying Initiatives Against Strict EU Regulations
Alibaba Exceeds Quarterly Projections Fueled by Growth in Cloud and AI
Tequila Sector Faces Surplus Crisis as Agave Prices Dive Sharply
Residents of Flintshire Mobile Home Park Grapple with Maintenance Issues and Uncertain Future
Ronan Keating Criticizes Irish Justice System Following Fatal Crash Involving His Brother
Gordon Ramsay's Lucky Cat Restaurant Faces Unprecedented Theft
Israeli Family Mourns Loss of Peace Advocate Oded Lifschitz as Body Returned from Gaza
Former UK Defense Chief Calls for Enhanced European Support for Ukraine
Pope Francis Admitted to Hospital in Rome Amid Rising Succession Speculation
Senate Republican Leader Mitch McConnell, at the age of 83, Declares His Retirement.
Whistleblower Reveals Whitehall’s Focus on Kabul Animal Airlift Amid Crisis
Politicians Who Deliberately Lie Could Face Removal from Office in Wales
Scottish Labour Faces Challenges Ahead of 2026 Holyrood Elections
Leftwing Activists Less Likely to Work with Political Rivals, Study Finds
Boris Johnson to Host 'An Evening with Boris Johnson' at Edinburgh's Usher Hall
Planned Change in British Citizenship Rules Faces First Legal Challenge
Northumberland Postal Worker Sentenced for Sexual Assaults During Deliveries
British Journalist Missing in Brazil for 11 Days
Tesco Fixes Website Glitch That Disrupted Online Grocery Orders
Amnesty International Critiques UK's Predictive Policing Practices
Burglar Jailed After Falling into Home-Made Trap in Blyth
Sellafield Nuclear Site Exits Special Measures for Physical Security Amid Ongoing Cybersecurity Concerns
Avian Influenza Impact on Seals in Norfolk: Four Deaths Confirmed
First Arrest Under Scotland's Abortion Clinic Buffer Zone Law Amidst International Controversy
Meghan Markle Rebrands Lifestyle Venture as 'As Ever' Ahead of Netflix Series Launch
Inter-Island Ferry Services Between Guernsey and Jersey Set to Expand
Significant Proportion of Cancer Patients in England and Wales Not Receiving Recommended Treatments
Final Consultation Launched for Vyrnwy Frankton Power Line Project
Drug Misuse Deaths in Scotland Rise by 12% in 2023
Failed £100 Million Cocaine Smuggling Operation in the Scottish Highlands
Central Cee Equals MOBO Awards Record; Bashy and Ayra Starr Among Top Honorees
EastEnders: Four Decades of Challenging Social Norms
Jonathan Bailey Channels 'Succession' in Bold Richard II Performance
Northern Ireland's First Astronaut Engages in Rigorous Spacewalk Training
Former Postman Sentenced for Series of Sexual Offences in Northumberland
Record Surge in Anti-Muslim Hate Crimes Across the UK in 2024
Omagh Bombing Inquiry Concludes Commemorative Hearings with Survivor Testimonies
UK Government Introduces 'Ronan's Law' to Combat Online Knife Sales to Minors
Metal Detectorists Unearth 15th-Century Coin Hoard in Scottish Borders
Woman Charged in 1978 Death of Five-Year-Old Girl in South London
Expanding Sinkhole in Godstone, Surrey, Forces Evacuations and Road Closures
Bangor University Announces Plans to Cut 200 Jobs Amid £15 Million Savings Target
British Journalist Charlotte Peet Reported Missing in Brazil
UK Inflation Rises to 3% in January Amid Higher Food Prices and School Fees
Starmer Defends Zelensky Amidst Trump's 'Dictator' Allegation
Zelensky Calls on World Leaders to Back Peace Efforts in Light of Strains with Trump
×