Pound sinks to a two-year low amid warnings over 'deep, dark recession'

The pound sterling marked its lowest point since the start of the pandemic in March 2020

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The pound dropped to a two-year low on Tuesday as the cost of borrowing surged, with warnings issued over a looming "deep, dark recession".

Sterling fell 0.7 percent to $1.16 against the dollar, marking its lowest point since the start of the pandemic in March 2020.

Speaking at a Ryanair press conference, Michael O’Leary - who has run the company since 1994 - said: “There is going to be a deep, dark recession, particularly here in the UK, driven by the high cost of energy.

“I think the consumer price inflation [CPI] is going to be nothing compared to the energy shocks coming this winter.”

The FTSE 100 ended the day down 74.48 points, or 1.05%, at 7,284.15 amid pressure from energy suppliers and producers.

Ryanair CEO Michael O'Leary has bleak predictions for the future of the UK economy.
Ryanair CEO Michael O'Leary has bleak predictions for the future of the UK economy.

Michael Hewson, chief market analyst at CMC Markets UK, said: “It’s been another disappointing day for the FTSE, with a slide in energy prices weighing on the likes of BP and Shell, with both crude oil and natural gas prices sliding for the second day in succession.

“Up until the end of last week the FTSE 100 had been on course for a positive month, however the last three days, and the hawkish tone from Jerome Powell’s Jackson Hole speech, has seen the rug pulled out from underneath the positive mood.

The pound has dropped to a two-year low.
The pound has dropped to a two-year low.

“We’re also seeing declines in the likes of National Grid, SSE and Centrica as concerns about a windfall tax on some of their profits resurfaces.”

Elsewhere in Europe, the other main markets were also lower as the European Central Bank prepares for a major rate hike.

The German Dax declined 0.97% by the end of the session and the French Cac finished 1.37% lower.

Across the Atlantic, the Dow Jones opened modestly higher despite the latest ADP jobs report highlighting an unexpectedly low increase in jobs numbers.

In company news, Anglo American dipped after an increase in rough diamond sales failed to offset warnings that the temporary closure of polishing factories for the Diwali holidays might hurt sales in the next few cycles.

Shares fell by 3.5p to 2,783p as the mining firm lost early gains from the start of the session.