The pound slipped this morning on political uncertainty and concern about the UK’s public deficit, but managed to stay off lows hit in yesterday’s sharp drop.

Pound Sterling – UK Markets

Monday saw sterling touch its lowest level in ten months as it fell more than four cents against the dollar. This was all a result of weekend polls indicating that the forthcoming election would result in a stalemate, which leaves the matter of Britain’s inflated budget deficit up in the air. New polls this morning have done little to change the pound’s fortunes, as sentiment remained negative. AT 0951 sterling traded at USD1.4871, lower than earlier trading but not quite hitting the lows of yesterday. With no triggers to buy sterling on the horizon, the market will keep an eye on a 2 billion pound auction of 2039 conventional Gilts later in the day to gauge investor confidence. Traders are saying that any sign of weak demand for UK government paper would hurt the pound. Sterling also hit a 25-year low against the Canadian dollar this morning and hovered near 25-year lows against the Australian dollar.

US Dollar – US Markets

The dollar strengthened 0.2% against the yen to 89.28 in earlier trading on speculation US policy makers may start to remove emergency measures introduced to revive the economy. Philadelphia Federal Reserve Bank President Charles Plosser told the Wall Street Journal that the central bank should back away from its pledge to keep interest rates low for an “extended period.” The greenback traded at 0.7398 versus the euro at the time of writing.

Euro – European Markets

The euro slid a second day against the dollar on speculation Greece will have to outline further spending cuts as Prime Minister George Papandreou prepares to meet Germany Chancellor Angela Merkel on March 5th. So Athens looks like it could be nearing a deal with EU governments for some form of aid in exchange for more stringent fiscal steps. This of course, would mean all eyes would turn towards sterling, allowing the euro some room to recoup its recent losses. Today at 1002 GMT the single currency traded against the pound at 0.9089.

Other Currencies – Highlights

The yen rose against the pound and the euro yesterday as investors trimmed stretched risk positions in higher-yielding currencies. The yen was bolstered by continuing investor concerns over mounting fiscal problems in Euro-zone countries and doubts over the pace of the worldwide economic recovery.