Aussie down despite UK political turmoil

The Australian dollar lost ground against Sterling yesterday, despite a steep fall in support for the ruling Labour party in European elections causing widespread political instability.

• Doubts over the Labour government and the leadership of Prime Minister Gordon Brown have added to concerns over the UK economy.
  
• Traders however are willing to back Sterling on dips, as seen on Friday, and managed to claw back some ground on the Aussie which was hit by falls in demand for investor risk. Falls on Asian stock markets overnight did little to improve investor risk appetite.
  
• The continuing uncertainty over when the world economy will recover is likely to continue driving direction, with more sporadic data likely to result in the rate ebbing and flowing in the short to medium term.