(Bloomberg) -- The pound slid to its weakest level in almost four decades as mounting evidence of a UK recession combines with an ascendant dollar.
Sterling fell as much as 1% to $1.1351, the lowest since 1985. The latest hit was data Friday showing UK retail sales fell at the sharpest pace in eight months in August, as a worsening cost-of-living crisis and plunging confidence forced consumers to cut back on spending.
“Today’s retail sales data just released were terrible,” said MUFG analyst Derek Halpenny. “The sterling-dollar exchange rate has further to fall in circumstances of increased financial market volatility.”
The UK currency has fallen around 16% this year. While that has mostly been a story of broad dollar strength, with almost all major currencies succumbing to the greenback, it also reflects the prospect of a UK recession and political uncertainty with a new government. Household budgets are being squeezed from inflation near a 40-year high.
Pound Marks Black Wednesday With Drop to Lowest Since 1985
Those headwinds are starting to be reflected against other currencies. Sterling hit its weakest since February 2021 against the euro Friday.