In a bitterly divisive and acrimonious election, British prime minister Tony Blair and his so-called New Labour Party won a historic third term in power.

No previous Labour government has survived more than two terms. It did so, however, with a sharply reduced majority, projected to be in the region of 66 seats, under half the party's previously unassailable 161 lead.

Much of the electioneering debate centered around the war on Iraq and Blair's allegedly slavish adherence to US geopolitical and economic policies.

The moneymen in last night expressed concern at Blair's lessened parliamentary muscle. Worried that the new, weaker Blair administration may be unable to continue shoehorning US and business-favorable policies through parliament, the currency markets in New York and elsewhere marked down the UK pound to its lowest level this week against the US dollar and the euro.

Comments Callum Henderson, global head of currency strategy at Standard Chartered in Singapore: "With a dramatically reduced majority for the Labour Party, the market is now refocused on the UK fundamentals. If the majority is reduced sufficiently, there are question marks [about the government's ability to push through economic policy]".

Data sourced from; additional content by WARC staff