Sterling dropped to its lowest level against the dollar in roughly six months today as the UK ramped up its measures to halt the spread of coronavirus.
The pound fell as much as 0.6 per cent to $1.219 this morning — its lowest level since early September. Against the euro it edged up 0.2 per cent to 91.06p, but remained close to the previous day’s six-month low of 89.89p.
Sterling has been in decline in recent weeks as the coronavirus outbreak has sent global markets crashing and caused investors to flee to safe haven assets such as the dollar.
Analysts said the pound was also vulnerable due to Britain’s high current account deficit.
Prime Minister Boris Johnson yesterday ramped up the government’s measures against the virus, urging people to practice “social distancing”.
The call for people to stay at home rather than eating out or going to pubs and theatres has sparked fears for the UK’s hospitality industry.
The Bank of England, which last week cut interest rates, is expected to take further measures to limit the economic impact of the health crisis.
Chancellor Rishi Sunak is also expected to unveil a further lifeline for British businesses this afternoon, just a week after he announced a £30bn package to tackle coronavirus in the Budget.
“We could potentially see more Bank of England stimulus coming through soon — for example a 15 basis point rate cut and potentially £100bn+ gilt buying QE (quantitative easing) scheme,” analysts at ING said in a note.
“Money markets are pricing in a 33 per cent chance of a further 25 basis point BoE interest rate cut next week.”