THE pound and the FTSE 100 ended the week well and truly on the back foot as investors fretted over a potential financial crisis in Turkey, the US-China trade war and the likelihood of a "no deal" Brexit.
The British currency, which has taken a Brexit hammering over the past five days, continued its downward slide against the dollar, losing 0.4% to end the session at 1.277.
It represents a 13-month low and experts are now warning of a further fall towards 1.20 if there is no sign of Brexit progress in the coming weeks.
Jameel Ahmad of FXTM said: "The pound has itself tumbled from 1.30 to marginally above 1.27 within a matter of days.
"Sterling desperately requires some positive news around Brexit negotiations, otherwise the negative investor sentiment presents a risk that pound selling could accelerate further down than the 1.20 ladder within a matter of weeks."
The pound failed to receive a boost from data showing UK economic growth rebounding in the second quarter as retail sales and construction benefited from the warm weather.
The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.4% between April and June, up from 0.2% in the first quarter.
But growth slowed on a monthly basis, with GDP rising just 0.1% in June, down from 0.3% in May and lower than the 0.2% growth logged in April.
Versus the euro, the pound fared slightly better, rising 0.6% to reach 1.118.
The single currency was under pressure after the European Central Bank (ECB) expressed concern that a number of eurozone banks might be exposed to the sharp decline in the Turkish lira.
The currency went into a freefall overnight and continued its plummet as the country "teeters on the edge of a balance of payment crisis and faces political pressure from Washington over the detention of a US pastor", said Fiona Cincotta at City Index.
Donald Trump also tweeted that he was doubling steel and aluminium tariffs on the country.
Turkey's woes rocked European stock markets as investors were spooked by contagion risks and sought sanctuary in safe havens such as US bonds.
The FTSE 100 lost 74.76 points, or 0.97%, to close at 7,667.01.
On the continent, Germany's DAX was down nearly 2% and France's CAC lost 1.73%.
In stocks, Mike Ashley's Sports Direct shares fell 1.3p to 405.4 after the retailer completed a £90 million rescue of ailing House of Fraser.
Sports Direct said it has acquired all 59 House of Fraser stores, the brand and all of the retailer's stock.
The billionaire said that Sports Direct will "do our best to keep as many stores open as possible".
In the same breath, he said: "My ambition is to transform House of Fraser into the Harrods of the high street."
Brent crude was trading nearly 1% up at $72.7 per barrel.
The biggest risers on the FTSE 100 were Carnival up 92p at 4,623p, Tui up 23p at 1.565.5, WPP up 17.5p at 1,2365p and Royal Mail up 6.2p at 465.7p.
The biggest fallers on the FTSE 100 were Evraz down 50.4p at 510p, Coca-Cola down 114p at 2,644p, Paddy Power Betfair down 295p at 7,449.8p and Rolls-Royce down 40p at 1,044p.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here