There was bad news for Britons heading to Europe on holiday after the pound fell below €1.10 for the first time in six and a half years, during trading on Monday.

The collapse in the pound is set to lead to higher prices for imported goods - a development that looks likely to put pressure on UK consumers.

Last week, Tesco reportedly refused to bow to Unilever's demands for a 10% wholesale price rise in its products including Marmite and Pot Noodle to offset a drop in sterling.

This led to the products being briefly withdrawn from Tesco's website before Unilever later confirmed the supply situation with the retailer was "successfully resolved".

Sterling has been under pressure since Britain voted in June to leave the European Union.


The pound has fallen by almost 20% against the dollar since the Brexit vote, trading below $1.22 and €1.10 on Monday, which is its lowest level against the euro since March 2010, according to data from Thomson Reuters.

Will the pound's fall affect you?

The market has also been reacting to speculation that Chancellor Philip Hammond could step down following a possible rift between him and Prime Minister Theresa May.

"The pound is behaving like an emerging market currency, with volatile price swings and little sign of stability," according to Kathleen Brooks, research director at City Index.

"Although the Treasury has denied that Hammond will quit his post, it doesn't help to instil confidence in the pound," she said.

Sterling has dropped more than 5% so far this month against the greenback, but is also weaker against every other currency in the G10 group of industrialised nations.

"To put this month's fall into context, the pound is weaker against the majority of emerging market currencies, including the resurgent Mexican peso and the Malaysian ringgit," Ms Brooks added.

Investors have continued to sell gilts, according to Sky News Business Presenter, Ian King. "There has been a very big sell off today in UK government bonds, which is partly over concerns that the lower pound is pushing up inflation."

Earlier this month, the deputy governor of the Bank of England, Ben Broadbent said that while the pound's plunge was helping support UK growth, Brexit uncertainty could cause an "insidious" hit on the economy.

Mr Broadbent indicated that it was "likely" inflation would rise over the Bank's target of 2% over the next couple of years.

The EY ITEM Club said the economy had been more resilient than expected following the vote to leave the European Union but this picture was deceptive.

It predicts inflation - which has been below 1% for nearly two years - climbing to 2.6% in 2017.

The latest inflation figures will be released on Tuesday.