Sterling tumbled to a fresh 37-year low against the dollar and a 17-month trough on the euro after weaker-than-expected retail sales figures issued today.

Meanwhile, the euro rose to as high as 87.66 pence, its highest level since Feb 2021, It was last up 0.39 percent at 97.52 pence. Retail sales volumes dropped 1.6 percent in monthly terms in August, the Office for National Statistics said today. It is the biggest fall since December.

It is the latest in a long line of bad news for Britain’s currency.

John Hardy, Head of FX Strategy at Saxobank, said: “The grinding backdrop of everything that’s going on is weighing on sterling, with the UK running these massive external deficits and the risks around the new Prime Minister’s policies adding to that.”

Liz Truss’s announcement last week of a two year cap on soaring consumer energy bills in a bid to cushion the economic shock of the war in Ukraine is likely to cost UK taxpayers upwards of £100billion.

That has spooked the currency markets, which have raised doubts over Britain’s ability to repay its debts and led some bond investors to shun UK gilts.

Chancellor Kwasi Kwarteng is due to make a “fiscal statement” later this month to explain how the Government’s energy crisis package will be funded.

He is also expected to say how he will deliver the tax cuts promised by Ms Truss during her campaign for the leadership of the Conservative Party.

MPs are expected to sit in the Commons on Thursday, according to a parliamentary business paper.

They will then be asked to sit a day longer before going into their conference break to allow Mr Kwarteng to set out his mini-budget.