Sterling drops to five-year low against the dollar

 
Chris Papadopoullos
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British Pound Falls To Five Year Low Against The Dollar
The pound is not doing well at the moment (Source: Getty)

The pound hit a five-and-a-half-year low against the dollar today, as markets tumbled in the wake of turbulent trading in China.

The pound was buying $1.4568 in mid-morning trading, after falling 0.42 per cent. It was also 8.2 per cent below its 2015 peak of 1.5883.

Sterling was also down 1.16 per cent against the euro and was buying €1.3414, its lowest since October. In July last year, the pound reached its highest value against the euro since 2007.

The news came as the FTSE 100 plummeted by as much as three per cent in early trading, after a so-called circuit-breaker was triggered for a second time on Chinese markets after less than half an hour of trading.

But fears over the prospective outcome of an EU referendum - not to mention an interest rate hike - have also taken their toll on sterling.

"The pound has weakened as expectations of a Bank of England interest rate hike any time soon have waned and there has also been a mounting market focus on the UK’s referendum on EU membership," said Howard Archer, chief economist at analysts IHS.

"Expectations of an interest rate hike have been pushed back by recent mixed UK economic data, a relapse in earnings growth and the likelihood that inflation will stay lower for longer due to oil prices falling to new lows."

The US Federal Reserve raised interest rates in December for the first time since they were cut to record lows in 2008.

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