Pound slides to weakest since 1985

The pound fell to its lowest level against the dollar in over three decades as the shocks caused by the coronavirus rippled through global markets.

Investors fled from UK assets as the pandemic began spreading through Britain, with many fearing Prime Minister Boris Johnson’s response 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.

“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,” said Neil Jones, head of foreign-exchange sales to financial institutions at Mizuho Bank Ltd.

Sterling fell as much as 1.9 per cent to $1.1828, surpassing even 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.

Alongside the pound, UK sovereign bonds plummeted after the government announced a rescue package for businesses in an attempt to stop the coronavirus wrecking the domestic economy. The yield on 10-year UK bonds rose to their highest in over two months, while the FTSE 100 stock index dropped around 5 per cent.

Banks have been wrongfooted 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.

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