The soaring US dollar pushed the pound to its biggest monthly decline since October 2016.
The pound lost 4.6% in August, after losing 14% so far this year, as worries grow over the state of the UK economy.
Thursday afternoon, it was hovering just above $1.15.
The news wasn’t much better against the euro – August was the pound’s worst month since May 2021 and on Thursday it fell to 86.7p.
It comes after UK inflation topped 10% in July – the latest available figure and the highest in 40 years – squeezing wages for households also facing record rises in energy bills.
Viraj Patel, global macro strategist at Vanda Research in London, told Reuters news agency: “It looks like a bit of a perfect storm now for the pound.
“There’s this whole ‘sell Europe, sell UK’ theme going on at the moment and it’s getting pretty extreme considering the myriad of
political and energy risks.
“There is also a Liz Truss risk premium that is starting to be factored in.
“Clearly the market is not reacting well to some of the policies announced by Truss, in particular the funding of the UK’s twin deficit.”
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Liz Truss, the Foreign Secretary, is expected to replace Boris Johnson as Prime Minister when the result of the leadership race is confirmed on September 5.
But it’s not just the political and economic situation in the UK that’s hurting the pound, it’s also against a 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 struggles: “It’s not just sterling weakness – it’s a story of dollar strength.
“The pound has its problems, but they are not unique to it – high inflation, soaring energy prices and falling disposable incomes.”
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