The pound has fallen to its lowest level against the dollar since 1985, as the spread of the coronavirus pandemic scares away investors.
The pound is currently trading at $1.15, which is a dramatic fall of nearly 5% just in one day.
Neil Wilson, chief analyst for Markets.com has said: “This is the worst sustained period of sterling selling that I can recall,” he says. “The government’s massive fiscal package undoubtedly means more borrowing for the UK economy – how do we pay for all this?”
UK Chancellor Rishi Sunak revealed a £350bn stimulus package for UK firms on Tuesday, including £330bn of business loan guarantees.
The chancellor promised fully non-pay-back grants for businesses based on their rate-able value, saying that nobody will be penalised for doing the right thing, with £10,000 cash grants for smaller firms.
It included aid to cover a business rates holiday and grants for retailers and pubs, with help for airlines also being considered.
Sunak said that the coronavirus is:
“a public health emergency but also an economic emergency”
Despite this, investors are still flocking to the comparatively safer dollar, says Ranko Berich, head of Market Analysis at Monex Europe.
“The UK’s response to the incoming coronavirus shock has been about as aggressive as possible in terms of monetary and fiscal policy, but this has done nothing to help sterling.”
“Idiosyncratic factors such as the UK’s monetary and fiscal response or Brexit are beside the point: this is about the US dollar, which is proving unstoppable as global financial markets stare into the abyss of crisis-like conditions,” he said.
On Tuesday, the United States outlined a $1tn (£830bn) proposal to support their economy, which is the biggest in the world. This is expected to include direct payments to families, small business assistance and bailouts for airlines and other industries.