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Pound slides on political turmoil Pound slides on political turmoil
(about 1 hour later)
The pound has fallen against the dollar and euro, hit by uncertainty over the UK's political situation after a third minister resigned from the cabinet.The pound has fallen against the dollar and euro, hit by uncertainty over the UK's political situation after a third minister resigned from the cabinet.
Early results from the local elections have also showed poor results for the Labour Party.Early results from the local elections have also showed poor results for the Labour Party.
The pound slid 1% against the dollar to $1.6022, a one-week low, while the pound hit a two-week low against the euro of 1.1277 euros.The pound slid 1% against the dollar to $1.6022, a one-week low, while the pound hit a two-week low against the euro of 1.1277 euros.
On Wednesday, the pound had hit a seven-month high of almost $1.67.On Wednesday, the pound had hit a seven-month high of almost $1.67.
"The UK political situation is rapidly moving from bad to worse which is acting as a major drag on the pound despite more encouraging housing news yesterday," said French financial services firm Calyon in a note to clients."The UK political situation is rapidly moving from bad to worse which is acting as a major drag on the pound despite more encouraging housing news yesterday," said French financial services firm Calyon in a note to clients.
'Difficult circumstances'
Investors think there is a risk that the UK could see a leadership vacuum at a fragile time for the economy.
However, news that Alistair Darling will remain in his job as chancellor was largely welcomed in financial circles.
"It is not really the time to be changing the chancellor," said Howard Archer, an economist at IHS 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," he added.