A soaring US dollar pushed sterling to its biggest monthly drop since October 2016.
The pound has fallen 4.6% in August, having lost 14% so far this year, as concerns about the state of the UK economy grow.
On Thursday afternoon, it hovered just above $1.15.
The news wasn’t much better for the euro – August was the pound’s worst month there since May 2021 and on Thursday it dropped to as low as 86.7p.
It comes after UK inflation topped 10% in July – the latest figure available and the highest in 40 years – leaving householders’ wages also facing a record rise in the bill. energy.
“It looks like a perfect storm right now for the pound,” said Viraj Patel, global macro strategist at Vanda Research in London.
“There’s this whole ‘sell Europe, sell UK’ theme going on right now and it’s getting pretty serious with loads of
political and energy risks.
“There’s also a Liz Truss risk premium starting to be priced in.
“Clearly the market is reacting poorly to some of the policies that Truss has announced, particularly the financing of the twin deficits in the UK.”
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Foreign Secretary Liz Truss, is expected to replace Boris Johnson as prime minister when the results of the leadership contest are confirmed on September 5.
But it’s not just the UK’s economic and political situation that is affecting the pound – it’s also working against the very strong US dollar.
The greenback hit a 24-year high against the Japanese yen on Thursday and gained more than 1.2% against the euro.
Michael Hewson, chief market analyst at CMC Markets, said of the pound’s troubles: “It’s not just sterling weakness – it’s a dollar strength story.
“Sterling has its problems, but they’re not its only ones – high inflation, rising energy prices and falling disposable income.”
