Sterling slid to fresh 15-year low against the dollar today as traders bet Britain's re-elected Labour government would push for early entry into the euro.
The resignation of Britain's euro-sceptic opposition leader Mr William Hague - who had touted the election as the last chance to save the pound - gave further ammunition to sterling bears, sending the currency plummeting over halfa cent in a matter of minutes.
Mr Hague's resignation was taken as an admission that his stance on the euro was the wrong one, said a trader at a European bank.
Sterling fell over one per cent to $1.3775, its lowest since February 1986, bringing its losses to almost four cents in just three days. Attempts at recovery were half-hearted and sterling was once again flirting with its lows in late London trade.
The pound also fell to three-week troughs against the euro, although most analysts say it would need to depreciate by a further 10 per cent to reach levels compatible with euro entry.
Going in at a higher rate would risk making British exporters permanently uncompetitive in their biggest export market, the euro zone.
Currency markets seem to be ignoring the hurdles that remain to euro entry, said Mr Mark Henry, currency strategist at GNI.Until Mr Blair offers reassurance that a referendum is not imminent, sterling will remain vulnerable to further near-term selling.