Economic News

LONDON (ShareCast) - Currency movements are usually explained by rather dry data such as purchasing managers' index readings, consumer confidence figures and mortgage approval rates.

But for the past four days, the turmoil at the heart of the UK government has been behind the slide in sterling's value.

The pound fell against other currencies again Monday - to $1.59 from $1.67 against the dollar last week for example - and, until the current crisis sorts itself out one way or another, looks set to continue sliding.

As was revealed last night, Labour was pummelled in the European elections last week, falling to third place behind the Conservatives and UKIP.

A Labour backbencher today compared Gordon Brown to Michael Foot. Mr Foot, who led Labour into a catastrophic defeat at the hands of the Conservatives in the 1983 election but still came second, might balk at this.

The announcement of another cabinet resignation today, this time of the little-known farming and environment minister Jane Kennedy, almost pales into insignificance after the twists and turns of the past five days, but it tightens the screws on Gordon Brown further.

Tonight's meeting between the PM and the Parliamentary Labour Party seems unlikely to lift the shroud of uncertainty currently playing havoc with the currency markets.

The current word is that rebels are unlikely to this week orchestrate a removal of Brown, who has the crucial backing of business secretary and Labour heavyweight Peter Mandelson.

Any new leader would face strong pressure to make an immediate general election announcement, which could be disastrous for Labour. But the rebels may find an opportunity to make their move after the summer recess, with the new leader able to keep the election at bay until next spring.

So the Labour government may be safe for now. Whether such 'stability' feeds through to the currency markets is another matter altogether.