Sterling finishes down against US Dollar on political uncertainty

Sterling weakened by 1.41 cents against the US dollar yesterday, to close the day at $1.6174.

• In early trading yesterda, sterling weakened against the greenback as concerns over the dollar’s status as the world’s reserve currency abated. However, the Bank of England’s decision to keep interest rates at 0.5% and stick to its £125 billion quantitative easing programme provided some lift for sterling as investors took this as a sign the central bank’s strategy could be working.
  
• However, rumours that Prime Minister Gordon Brown was set to resign caused a sharp tumble in the pound, although this was quickly refuted as “absolute nonsense” by his office. Nevertheless, a mixed day on equity markets, coupled with a batch of profit-taking by traders after the pound’s sharp rally over the past week, drove sterling lower.
  
• In trading so far today the pound has continued its slide against the greenback, as concerns mounted over the UK’s political situation. Work and Pensions secretary James Purnell is the latest minister to quit the cabinet, and the first to openly call for Prime Minister Gordon Brown to stand aside.
  
• In the UK, PPI Input (MoM) data is out at 09.30 BST, whilst in the US Non-Farm employment figures are due at 13.30 BST.