Political problems hamper pound against euro

The pound fell by 1.16 cents (1.01%) against the euro yesterday, finishing the day at 1.1402.

• In early trading yesterday sterling rose against the euro, after a report released by Halifax showed a 2.6% rise in UK house prices last month. In addition, the Bank of England’s decision to keep interest rates on hold and not extend their quantitative easing programme kept demand for sterling high as the central bank appeared to adopt a ‘wait and see’ position.
  
• However, rumours that Prime Minister Gordon Brown had resigned after lunch caused a sharp fall in sterling’s value, driving it into negative territory. This fall was exacerbated by the news the European Central Bank had left their interest rates at a historic low of 1.00% and decided not to extend their planned asset purchase programme.
  
• In trading so far today the pound has continued its slide against the single currency as investors continue to eye the UK’s fragile political situation carefully.
  
• There are no major announcements due in the eurozone today, while in the UK PPI Input (MoM) is out at 09.30 BST.