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The pound took another beating today as savage political infighting destroyed confidence in the UK currency.
Sterling was down 0.7 cents against the US dollar to $1.614 and 0.35 cents against the euro to 1.1385, making a euro worth 87.8p.
It was the third day of heavy losses and came as continued political unrest in Westminster alarmed the City, although news that Alistair Darling kept his job as Chancellor was welcomed.
The pound is down 3% against the greenback since its high of $1.6654 on Wednesday.
RBC currency strategist Adam Cole said: “The market is waking up to what a mess politics are in the UK and that is causing sterling to underperform.”
There were also signs that the recession may be deeper than thought. Official figures showed output from the construction sector fell 9% in the first quarter, far worse than the 2.4% initially reported.
The Office for National Statistics said it will now revise down its view that the economy shrank by 1.9% in the first three months of the year.
The pound has tanked since the resignations of Cabinet ministers Jacqui Smith, Hazel Blears, James Purnell and John Hutton, having hit a seven-month high against the dollar on Wednesday. Gordon Brown is now even money with bookmakers to lose his job as Prime Minister before the end of the month despite today's desperate Cabinet reshuffle.
David Buik of BGC Partners said: “This sell-off is a reaction to political uncertainty. Markets loathe uncertainty. They deal very well with good news, very well with bad news but they cannot cope with uncertainty.”
Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank, said: “The pound is currently a sell and should move below $1.60. A Brown resignation and the demise of the Labour party will, longer term, prove pound positive.” The City welcomed news Ed Balls will not be Chancellor. “It is not really the time to be changing the Chancellor,” said Howard Archer, chief UK economist at Global Insight.
“Obviously, Darling has had his problems, but he has had to face very difficult circumstances. There has been a lot of criticism, but he has not done that bad a job.”
Reader views (3)
Britain and the pound will go on going downhill, because
abroad people do not see the U.K. a country with charisma
or imspiration as it was in the 1960,s and the 1970,s
Today britain look as a country very dull,with most
people antisocial and unfriedly,full of recent to foreing
advance, with the monarch , cars, industry,banking system
and in general nothing much good turning out, and when
abroad they are noise,mean,and arrogant,on a ego trip.
- Paul Satchell, Tenerife -Spain
Thanks Gordon Brown. Go now.
- Dave Davies, Basingstoke
Crash Gordon does not want to leave his UN-ELECTED position that is why Britain is not looked at as safe for investing in. What would you do with such a "man" "at the helm"!
- Peteo, London NW1
