The pound has hit its lowest level against the dollar in 35 years as markets react to pandemic and investors flee ever deepening gloom over the coronavirus crisis.

It comes despite UK Chancellor Rishi Sunak vowing to help households and businesses weather the storm.

The pound is down 1.47% against the euro and more than 2% against the US dollar, meaning that a pound buys €1.07 and $1.18.

Neil Wilson at markets.com said the decline in sterling was “one of the steepest in memory”, leaving it at its weakest level since 1985, excluding a brief dive in October 2016.

He added: “This is the worst sustained period of sterling selling that I can recall, and it points to a severe dollar liquidity crunch that central banks have yet to get a grip on. There is a synchronised rush for dollars that has caught most companies, governments and traders on the hop. Dollar funding issues have been far more serious than estimated prior to this crisis.”

The FTSE 100 plunged by 5.3% in morning trading on Wednesday wiping out strong gains seen the day before via Donald Trump unveiling a plan for an $850 bn stimulus package.

24 hours later and the enthusiasm had faded, with Asian markets falling again overnight.

The CAC 40 in France was 6.5% down in afternoon deals.

Wall Street followed Europe lower with the Dow dropping 6%, taking values below the 20,000 point mark, as US treasury secretary Stephen Mnuchin said parts of the US economy would be shut down to “destroy” the virus.

Analysts from London Capital Group said that the “magnitude of the pandemic is outweighing stimulus hopes”.

They said: “We just have our doubts about whether any government can execute complicated measures in time when the support is needed as soon as possible.”

GAIN Capital Group added in a note: “The fact that the FTSE has failed to hold onto any of the gains quite simply suggests that this is not enough.

“There needs to be a coordinate global response, which up to now hasn’t happened. As a result, the markets are vulnerable to further fallout.”