The British pound fell sharply versus the euro and the dollar as a fifth U.K. minister resigned, increasing the already significant concerns on Gordon Browns government stability and the British political future.
The United Kingdoms prime minister Gordon Brown is facing a severe crisis in the Parliament, as Pensions Secretary James Purnell resigned this week, being the fifth minister to step down since the beginning of the government crisis. The situation deepened in the Parliament as local elections results indicated that Browns Labour Party lost eight seats, an evidence of discontentment towards his government. The pound suffered directly the reflections of the current political crisis, posting the biggest weekly decline April, followed by a drop in the Government bonds rate.
A part from the real estate crisis that affected the U.K. heavily, economists state that the government crisis will make it virtually impossible for the British currency to rebound and as concerns on Browns resignation emerge, the pressure is on the pound. Signs of recovery as economic data and consumer confidence numbers will not be sufficient to bring the pound to higher levels. Currently in a recession, the United Kingdom government crisis added to the pessimism concerning the countrys economic outlook, keeping the pound bearish for the mid-term future.
GBP/USD dropped to 1.6040 from 1.6370. EUR/GBP rose significantly from 0.8705 to 0.8845. GBP/JPY fell slightly to 155.11 from 156.40.
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