And the enervating body-shots to the currency will go on as long as financial markets believe that the Bank of England is likely to continue with interest rate cuts as a response to the de facto recession.
The pound fell a further 4 per cent against the dollar this morning as the stock market continued to plunge and the pressure for a further half-point interest rate cut grew.
Sterling is particularly nervous because we now seem to be in the new territory of half-point rate cuts by central banks rather than the quarter-point moves we all got used to for so many years.
How long ago it seems since Tory Chancellor Ken Clarke said we were now in the big boys’ club of only having to tweak the economy with 0.25 per cent tightenings and easings of monetary policy.
Such is the gloom that anything less than a half-point cut, following on from the half-point cut earlier this month, would probably be viewed as anti-climactic by stock markets and lead to fresh falls in equities.
But that new interest rate mentality, while benefiting homeowners and British exporters, will continue to see the pound friendless on international money markets.
At one stage this morning the pound was down 3.6 per cent against the dollar at $1.54, nudging near the six-year lows it hit last Friday.
My gut feel is that sterling could easiy test $1.30 by the end of the year given that there is virtually nothing to propel it upwards.
Recession is seldom good news for the pound. Perhaps the currency’s only consolation is that other countries are entering recession, too, and that may take some of the sting out of the fall.
However, even then we may see a situation in the New Year where sterling has stopped falling as mainland Europe feels the economic pain and also cuts its rates farther, but goes through a period of being becalmed.
Investors are seeking safe havens in the bad financial climate we are in, which is normally good news for the US dollar, US Treasuries and gold.
Unfortunately safe haven and sterling would fail to recognise each other in a small lift at present.
