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How the pound has changed since its last record slump - in one chart

Ashley Kirk
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How the pound has changed since its last record slump - in one chart

The pound has hit an eight-year low against the euro, falling to near parity with Europe's single currency.

Amid concerns over the Pacific crisis and a sluggish British economy, a pound now buys €1.0763 - down 0.31pc today alone.

Such levels are approaching the all-time lows seen at the height of the financial crisis in late 2008 and early 2009.

This summer was already good for the euro, with economic growth picking up in France, Germany and their neighbours.

Meanwhile, the UK economy has become more sluggish and traders appear to be waiting for signs of progress in the Brexit negotiations before backing the pound.

As a result, sterling has fallen by 8.3pc against the euro since the start of 2017 - but at the same time, it has increased by 5.3pc against the dollar over the same period.

This has seen the pound fallen to an almost equal level to the euro - last seen in 2009.

Currency markets' roller coaster ride

The currency markets have been on something of a roller coaster ride since that point.

Sterling was far stronger than the euro during Britain's boom years ahead of the financial crisis, tumbling when disaster struck and Royal Bank of Scotland needed a bailout, followed by Lloyds Banking Group.

By Christmas of 2008 the pound only bought €1.03, almost hitting parity with the euro.

As Britain's economy started to recover, very gradually, the eurozone ran into its own troubles.

This forced the euro down as the Greek debt crisis, alongside the Irish and Portuguese bailouts, led to doubts about the entire future viability of the eurozone as a political and economic construct.

Much of the solution to this crisis lay in Mario Draghi, the head of the European Central Bank, promising to do "whatever it takes" to save the euro in 2012.

That opened the door to printing money to buy government bonds, capping borrowing costs in troubled countries and pumping extra money into the economy. In 2014 the ECB bought private sector securities and in 2015 it unveiled a €1.1 trillion plan to buy government bonds.

It might have averted a collapse in the eurozone, but the policy still pushed the single currency downwards as loose policy and ultra-low interest rates weakened the euro.

For much of the period since then Britain has been the stronger economy, driving sterling up.

2016's downwards turn

That changed in early 2016 when the pound began its fall and was seriously accelerated by the Brexit vote which sent the currency plunging.

It fell further in October of 2016 when Theresa May's speech to the Conservative party conference confirmed that the referendum result would be accepted.

Over winter, external dynamics drove the market, as Donald Trump's election and promises of tax cuts and a spending spree drove up expectations of an economic boom and so pushed up the dollar.

That was followed by a growth spurt in the eurozone. When fears of political crises faded - the election of President Macron in France was a key moment - the euro appreciated.

And now that President Trump's pledges have failed to materialise, money is flowing back from the US dollar and into the euro. Combined with underwhelming UK economic performance, the pound is down and the euro up.

If Mr Draghi presses on with expected plans to rein in quantitative easing in the eurozone, sterling could stay under pressure for the rest of the year.