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FOREIGN EXCHANGE

Political elections have little or no impact on today's financial markets

Markets used to move at the hint of change in the political landscape. These days, surprise election results seem to have little or no impact.

Market sentiment: Who cares who wins?

Sterling’s recent fall back below 1.90 against the dollar was attributed by some to the apparent near outbreak of civil war in the UK’s ruling Labour Party. However, since there was little lasting weakness shown against other currencies, most market participants played down the impact that Labour’s shenanigans to oust its leader and UK prime minister Tony Blair had on the pound. Instead, cable’s fall was seen more as a product of unexpected dollar strength.

In fact, whether prime minister Blair was going to become the victim of a modern-day night of the long knives and be replaced by his one-time sidekick and next-door neighbour Gordon Brown really warranted little concern in the market. Similarly, the possibility of a challenge emerging to threaten Brown’s long wait for the top job in British politics has also elicited little more than a yawn. Even the possibility that Labour’s potential implosion was increasing the likelihood of the opposition Conservative Party returning to power after a decade in the political wilderness seemed totally irrelevant.

This is all in huge contrast to the way currencies and other assets used to react. Once, it was not only an issue about which party was in power, but also who was in charge of that party.

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