March 12, 2020 / 12:39 PM / 17 days ago

Sterling drops to near five-month low on growing coronavirus turmoil

* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv

LONDON, Mar 12 (Reuters) - Sterling fell to a near five-month low against the U.S. dollar and euro on Thursday, weighed down by deepening market turmoil after U.S. President Donald Trump slapped restrictions on travel from Europe.

The British currency received a short-lived boost on Wednesday when investors welcomed stimulus measures from the Bank of England and the British government, including an interest rate cut and billions of pounds of support for struggling firms.

But the pound tumbled later in the day following Trump’s flight ban.

The U.S. flight ban exempts Britain but has been seen as a sign of an escalating crisis.

Sterling slid more than 1% to a near five-month low at $1.2654. It was last down 1% at $1.2690.

The pound also fell to 88.89 pence per euro, its lowest level against the singe currency since October. It was last down 0.5% at 88.40 pence.

“I think of course they tried to surprise us with the rate cut and a big package. I thought it was well coordinated but I think people are still so scared they don’t want to be long sterling. It still makes sense to be somewhat short sterling,” said Morten Lund, senior FX strategist at Nordea.

The European Central Bank is expected to announce a stimulus package to support the euro zone through the coronavirus crisis later on Thursday.

“The aggressive response to combat the coronavirus fallout by UK policymakers has failed to alter the pound’s recent weakening trend,” said analysts at MUFG.

“The coordinated loosening of fiscal and monetary policy should help to provide more support for the UK economy but is no silver bullet to prevent a sharp slowdown in the coming quarters.”

The pound’s fall was mirrored by a slide in stocks in London, with the FTSE 100 index last down nearly 6%.

British Prime Minister Boris Johnson is due to chair an emergency meeting at around 1315 GMT at which he is expected to approve moving to the “delay phase” of the response to the coronavirus including more stringent control measures. (Reporting by Iain Withers Editing by Robert Birsel and Raissa Kasolowsky)

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