Blair uncertainty keeps pound down
Yesterday Tony Blair failed to give a date for stepping down, only admitting that this month's Labour Party conference will be his last as leader.
Sterling responded to the news by continuing to head downwards, starting Friday at $1.87460, 1.47280 and 217.67 yen.
The prime minister told reporters after visiting a school: "The next party conference in a couple of weeks will be my last party conference as party leader. I am not going to set a precise date now. I don't think that's right."
He added: "I think the precise timetable has to be left up to me and be done in the proper way."
Chancellor Gordon Brown echoed this by saying: "I want to make it absolutely clear today, that when I met the prime minister yesterday, I said to him - as I've said on many occasions and I repeat today - it is for him to make the decision."
While the markets were shaken by the certainty, chief UK and European economist at Global Insight Howard Archer said the market implications would be "very limited".
He said: "The announcement is only really confirming what has seemed ever more likely in recent months."
He added: "The macroeconomic implications are likely to be minimal, as it is Brown who has been essentially driving the economy for the past several years anyway. One can assume that as prime minister, Brown will retain a key interest in the running of the economy.
"He is also likely to ensure that his replacement as chancellor is very much on the same wavelength (Ed Balls seems a distinct possibility), so major changes affecting the economy are unlikely."
Mr Archer, however, added that dangers did exist in the fact Mr Brown is not guaranteed to enter 10 Downing Street.
He said: "The main risk to the markets is not so much in the short-term, but the medium-term. While Gordon Brown currently looks highly likely to be the man to replace Blair, nine to ten months is a long time in politics and it is not impossible that some credible challengers emerge to Mr Brown."
He added that Mr Brown's position could potentially be weakened if the economy took a severe downturn in the next year, as he is closely linked with its performance.
"While such a downturn currently seems unlikely, there are significant risks to the economic outlook. If increasing uncertainty emerges over the coming months about Brown's position as the next prime minister, then the markets could be increasingly adversely affected," the economist concluded.