May 14, 2010 / 8:13 AM / 8 years ago

Sterling slips, wary of politics, deficit plans

* Sterling down 0.3 percent at $1.4549 GBP=

* UK politics weigh on dearth of economic data

* Market eyeing govt plans to cut budget deficit

LONDON, May 14 (Reuters) - Sterling lost ground on Friday on concerns over potential political tensions after a coalition governmnet took power and over how the new administration plans to tackle Britain’s massive debt.

The pound slipped to the day's low against the dollar of $1.4535 GBP=D4, nearing a one-year low of $1.4475 hit last Friday.

Initial concerns about the political outlook cleared after a coalition government was formed on Tuesday following an inconclusive election last week.

But some British media reported on Friday dissent among Conservative Party parliament over a move to raise the threshold in confidence votes, making it more difficult for lawmakers to dissolve parliament before the end of its five-year term.

“Tensions within the coalition government will keep sterling jittery,” said Adam Cole, global head of FX strategy at RBC Capital Markets.

By 0753 GMT, sterling was down 0.3 percent at $1.4549 GBP=D4.

Technical analysts said sterling remained on a downtrend after closing below $1.48 on Thursday, although open interest suggested it was an already crowded trade.

The euro was up 0.4 percent at 86.14 pence EURGBP=D4.

Market players will be watching how the new government accelerates budget cuts to bring down the deficit, set to rise more than 11 percent of gross domestic product this year.

The government has pledged to make 6 billion pound worth of spending cuts this year, but detail remain vague.

Some see sterling remaining under pressure.

“Sterling is expected to be increasingly exposed to the sovereign debt crisis,” BNP Paribas analysts said.

Britain retains a top-notch sovereign rating, but some ratings firms have said it needs to shore up its finances quickly.

Reporting by Tamawa Desai

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below