The sterling dollar rate hit $1.1948 as resignations came from chancellor Rishi Sunak and the health secretary Sajid Javid.

This rate was last seen two years ago, and comes as sterling has already weakened over the last six months. Sterling has also fallen 11% year-to-date against the dollar.

Mike Owens, UK sales trader at Saxo Markets, said: “The resignations of senior members of Boris Johnson’s cabinet yesterday evening – including chancellor Rishi Sunak, throw even more uncertainty towards the government and how it plans to deal with a growing list of economic problems.

“The pound continued its decline and traded at a two-year low against the dollar and has even underperformed the euro over the past three months, while the eurozone copes with its own problems thrown up by the Ukraine war and the energy price crisis.

“Sterling has failed to pick up so far this year – falling 11% year-to-date against the dollar as the UK faces one of its worst threats to the economy in decades, this is just adding to rising inflation through the price of food, petrol and imported goods affecting millions.”

Owens added: “International forecasters have said Britain is more susceptible to a recession and persistently-high inflation than other western countries, all of whom are grappling with global energy and commodity market shocks. The Bank of England’s falling GDP projections this year have also somewhat paralysed investors with many left trying to predict the future and knocking market confidence.”

Russ Mould, investment director at AJ Bell, said: “The pound was already sliding before the UK government was plunged into chaos, yet the resignations of Rishi Sunak and Sajid Javid have simply added to the currency’s woes as it shows a cabinet in disarray.

“Recession fears have weighed on the pound in recent months and the currency has now hit a two-year low against the dollar as inflation continues to hurt consumers and businesses.

“Political chaos adds another layer of uncertainty on top of the recession fears, so it is no wonder the pound is sinking.”