Low sterling exchange amid election worries

Sterling exchange rates fell against both the dollar and the euro on Tuesday (January 5th).

As momentum builds for the UK general election, worries have increased among investors as to how the country will handle its fiscal deficit.

The possibility of a hung parliament is proving particularly troublesome as analysts believe such a result would prevent strong economic action.

Christian Lawrence, foreign exchange strategist at Royal Bank of Canada Capital Markets, said to Reuters: "Sterling did sell off after the construction data, but it's largely the political backdrop that is the focus at the moment."

The contraction in the UK's construction industry also contributed to the fall in the pound's worth, as other economies see their industries slowly begin to regain a stronger footing.

Sterling reached a low of $1.6 to the pound at midday of Tuesday.

The currency did not fair any better against the euro with a low of €1.11 to the pound.

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Posted by Sarah Pitton