Sterling drops after the PM steps down

GORDON Brown’s decision to resign as leader of the Labour party caused sterling to slide yesterday as investors reacted to the possibility of a left-leaning coalition with the Liberal Democrats.

News of Brown’s decision caused sterling to drop more than a cent against the dollar, from $1.502 to $1.486. The fall came minutes after the Prime Minister gave his speech.

The pound also fell against the euro. The euro increased from 85.5p against sterling to around 86.5p in late trading.

London’s markets closed just before Brown’s statement, with the FTSE 100 index ending five per cent up to 5,387.42. Fears are rising over whether a Lib-Lab coalition could pay down the deficit quickly.