British pound slammed by unclear election result

The pound slumped to a 13-month dollar low and London stocks sank yesterday on fears that Britain's election outcome would hamper the nation's ability to slash sky-high public debt, analysts said.

"We are in no-man's land at the moment and the markets do not like uncertainty - this is leading to a sell-off in the pound," said Currencies Direct dealer Phil McHugh.

Thursday's election has sparked the first official hung Parliament since 1974, with the main opposition Conservatives garnering the most seats but with no chance of winning an overall majority, results showed.

In reaction, the pound tumbled to $1.4476 - its lowest level since April 2009 - as it became increasingly clear that the Conservatives failed to clinch a decisive victory against the ruling Labour party.

And the British currency slid to a one-month low of €1.1353.

"The pound has been crippled by the spectre of political uncertainty," said Mark Bolsom, head of the UK trading desk at Travelex.

"A hung Parliament really is the worst possible result for the pound and foreign exchange markets are very volatile.

"Investors are concerned that a hung Parliament will paralyse the formation of a credible deficit reduction plan," he said, adding that many were seeking traditional safe-havens like the dollar.

Sterling later pulled back to stand at $1.4635 at about 1030 GMT in choppy trading.

The British stock market also sank by one per cent, slammed by sharp falls elsewhere amid mushrooming fears that the Greek debt crisis will spread across the eurozone.

The European single currency had meanwhile plunged to $1.2529 on Thursday, striking a 14-month low, on heightened concerns about Greece.

Traders worried that the uncertain election outcome will affect the new British government's ability to slash the deficit and preserve the nation's top-level credit ratings.

However, international ratings agencies Moody's and Standard & Poor's said that the hung Parliament verdict would not affect their top-level assessments.