12 May 2010

Markets react favourably to UK government

12:49 pm on 12 May 2010

Financial markets have reacted favourably to the confirmation of a Conservative-led coalition government in Britain.

Britain's Conservative Party leader David Cameron has become the country's new prime minister, and Liberal Democrat leader Nick Clegg the deputy prime minister.

Sterling rose on the announcement and the interest rate on British government debt fell.

The New Zealand dollar had been buying as much as 48.8 pence on Tuesday night but later since slipped back, and was trading at just under 48 pence by midday on Wednesday.

Westpac currency strategist Imrie Spiezer says while markets are relieved a government has been formed, the UK economy still has substantial problems.

He says it will take a significant shift and concrete evidence that the government is going to do something quite different before markets become less negative about the British currency.

Mr Speizer expects the New Zealand dollar to fall to 45 pence against sterling before rising again to fresh highs later this year.