Sterling tumbles as hung parliament is confirmed

Category: Economy
Date: 5/7/2010

The pound tumbled to a 12 month low this morning, as the UK woke up to the first hung parliament in a number of years.

No party was able to gain an overall majority in the House of Commons, meaning there is the possibility of the Conservatives looking to rule with a minority government or a coalition between two of the three main parties being agreed.

Analysts and experts were split on whether such a result would have an affect on the pound and the markets.

However, sterling fell to a 12 month low against the dollar this morning, with the value of £1 falling as low as $1.4597.

The pound also fell to a three month low against the euro to 1.1547.

"The pound has been crippled this morning by the spectre of political uncertainty," Mark Bolsom, head of the UK trading desk at Travelex Global Business Payments said.

"It is now crucial to our economic recovery that the main parties agree on a credible plan - indecision will threaten our credit rating and undermine the pound."

Duncan Higgins, senior analyst at Caxton FX, said: "The uncertainty surrounding the next government has simply compounded pressure on sterling, and against the dollar it is continuing to drop.

"With the ongoing crisis in the eurozone and its longer-term ramifications also in focus, we are not too optimistic about sterling's short term prospects."

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