London, June 8 (BridgeNews) - Sterling fell further against the U.S. dollar to hit 15-year lows amid speculation that the U.K.'s entry into the euro zone will be speeded up after the Labour Party won a second straight landslide in the U.K. general election.
The pound fell to around $1.377, from its opening level of $1.391. Conservative leader William Hague's announcement that he will step down once a replacement is found was seen as triggering the fall. Results from Thursday's election showed Labour set to win a 167-seat majority in the 659-seat House of Commons, not far short of its 1997 victory.
Traders speculated that Blair's decisive defeat of the opposition Conservative Party, which fought on an anti-euro platform, may mean the drive for U.K. entry to European Economic and Monetary Union will go ahead with less resistance.
The pound would probably need to be devalued as part of the process of the U.K. joining the euro.
Questioned by the British Broadcasting Corp. on Labour's intentions toward the euro, Chancellor Gordon Brown repeated the standard line that the government will make a decision within two years on whether the economic conditions are right to join the single currency. Should that assessment be positive, Blair has pledged to hold a national referendum on the issue. Market players now believe a poll is likely to be held sooner rather than later.
However, the Labour Party is aware of how damaging the euro issue was to the last Conservative administration.
As a result, the government is likely to take time to convince the public that EMU entry would be beneficial, and this may push the timing of the referendum further into the future than the market currently expects.