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The pound tumbled to levels not seen in several decades, as investors flocked to the perceived safe haven of the dollar while stocks continued to tumble on fears of the coronavirus pandemic doing severe damage to the global economy.
The pound GBPUSD, -2.3725% slid 1.7% to $1.1850 to its weakest since 1985, excluding the brief October 2016 “flash crash,” noted Neil Wilson, chief market analyst at Markets.com. The pound has lost 10% year to date and 7.7% for the month of March so far. That is as the FTSE 100 UKX, -3.14% tracked a selloff seen across the globe, down 4.5% to 5,053.12. If that loss holds or worsens, it would mark the deepest drop since March 12, a slide of 10%.
“This is the worst sustained period of sterling selling that I can recall, and it points to a severe dollar liquidity crunch that central banks have yet to get a grip on. There is a synchronized rush for dollars that has caught most companies, governments and traders on the hop. Dollar funding issues have been far more serious than estimated prior to this crisis,” said Wilson.
Andrew Bailey, the new Bank of England governor, told Sky News that the U.K. central bank wouldn’t rule out giving money directly to households and businesses, though he said that wasn’t a signal it was about to. “Of course the Bank of England’s not done. We have to support the people of this country,” he said.
The U.K.’s Chancellor of the Exchequer Rishi Sunak announced a £350 billion ($412 billion) package to support businesses, promising to do “whatever it takes” late on Tuesday.
As for the FTSE 100, Wilson said 4,900 seems to be the bottom for now, but that bulls would soon be defending the 5,100 mark. If that level holds, bulls can consider a bottom for the market soon.
Compounding pain for U.K. stocks, oil prices cratered on Wednesday, with U.S. crude CL.1, -13.21% sinking 10% to $24.16 a barrel, and Brent prices BRNK20, -7.55% falling over 6% to $26.86.
That drove shares of heavily weighted BP BP, -8.92% BP, -7.12% down by 6% and Royal Dutch Shell Group RDS.A, -8.30% RDSA, -8.31% over 10%. Airlines continued to suffer, with International Consolidated Airlines Group IAG, -8.36%, which operates British Airways and others, down more than 10%.
A handful of supermarkets and consumer goods companies were in the black as individuals continued to stock up on goods amid fears of coronavirus-driven shortages. Shares of Marks & Spencer Group MKS, +11.89% rose 11%, J. Sainsbury SBRY, +13.91% climbed 10% and Wm Morrison Supermarkets MRW, +10.56% rose 9%. Reckitt Benckiser Group RB, +2.98% shares added 1%.
