British pound sinks nearly 2% against the dollar, set for worst daily drop since March 2020

The British pound was set for its largest daily drop since the onset of the coronavirus pandemic on Thursday, after the Bank of England warned of a sharp growth slowdown in the U.K. economy.

Sterling hit a low of 1.2393 against the dollar early Thursday afternoon London time, its lowest level since Jul. 1, 2020.

In a widely expected move, policymakers at the Bank of England voted for a fourth consecutive rate hike since December. But policymakers also warned that GDP growth is expected to slow sharply and inflation could peak at 10% later this year.

"We are walking this very narrow path now. The proximate reason for raising bank rate at this point is, it's not only the current profile of inflation, what is to come and of course what that could mean for inflation expectations to come, but the risks as well," BOE Governor Andrew Bailey said Thursday at a press conference.

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