LONDON — Sterling in August suffered its sharpest monthly fall against the U.S. dollar since the aftermath of the Brexit referendum, as political uncertainty and a historic cost-of-living crisis weigh heavily on the British currency.

Sterling dropped 4.5% against the greenback last month and continued to slide on Thursday, last trading just below $1.16 by mid-morning in London. The pound also fell nearly 3% against the euro last month.

The U.K. faces a rapidly deteriorating cost-of-living crisis as food and energy prices soar, with millions of households facing poverty this winter.

Meanwhile, a new prime minister will be named next week following a ballot among Conservative Party members, causing uncertainty over the outlook for fiscal policy.

The energy crisis arising from Russia’s war in Ukraine is now widely expected to push the euro zone and U.K. economies into recession, while some economists still tip the U.S. to avoid the same fate given its relatively stronger economic position and energy independence.

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