The pound has fallen to its lowest level against the dollar in 37 years.

Sterling dipped as low as $1.1403 on Wednesday afternoon. The last time it was so low was in 1985.

The drop is partly because of rocketing inflation and the gloomy outlook for the economy and partly because of a resurgent dollar.

Yesterday saw US currency hit a 24-year-high against the Japanese Yen and close in on a 20-year-high against the euro.

However, the plummeting pound comes as Liz Truss prepares to borrow around £100bn to pay for an 18-month freeze on energy bills. 

Andrew Bailey, governor of the Bank of England, highlighted the strength of the US currency as he spoke to MPs on the Treasury Select Committee.

He also said the war in Ukraine meant little could be done to stop the UK from falling into a recession this year.

Asked by MPs if there was much that the central bank could do to stop it, he told them: "Insofar as the war is having this huge effect, the answer to that would be no."

He said the Bank would take the new prime minister's energy plan announcement "into account" when deciding on interest rates next week.

 

Last month, the Bank of England forecast five consecutive quarters of recession.

 

New Chancellor of the Exchequer Kwasi Kwarteng also spoke to business leaders earlier in the day, highlighting that increased borrowing would be needed to fund energy plans, which are due to be announced on Thursday.

 

There is some hope that this will prevent inflation from spiking further.