Finally!  We have a new Prime Minister and whilst David Cameron may not have won an outright majority, the outcome of the election was clear that the country did not want a Labour government or Labour coalition despite Gordon Brown’s best efforts to form one.  In unchartered waters now, the new coalition government will not have an easy ride, but at least the rhetoric so far is encouraging with both teams waving the new Blue and Yellow flag to stabilise the economy and deal with the UK deficit.  The next landmark in the political calendar is the emergency budget in fifty days, when our new Chancellor will announce the finer details of deficit reduction and tax increases or maybe even the odd cut here or there.

The FTSE is a little weaker in early trade after the dip towards the end of the US session last night, although we were calling the market a little lower overnight.  The markets look to have stabilised a little for now, and many investors are just biding their time before diving back in too fast, as the sovereign debt situation throughout Europe still looks incredibly unstable.

There’s plenty of economic data out today, with UK unemployment numbers at 9.30, which should show that the private sector is starting to hire again, although at a vey slow pace.  After that the quarterly inflation report is released at 10.30, which will highlight concern over the increasing rate of inflation, but it unlikely to show a big change in inflation expectations that should continue to point to a decline later in the year.

Cable had a see-saw day, as the market tried to get to grips with whether the Lib Dem leader was going to get into bed with Labour or the Tories and as things gradually emerged that a Tory/Lib-Dem tie up was most likely, the short-covering allowed sterling to head back towards 1.5000 against the dollar and 1.1800 against the euro.  But after Gordon Brown’s surprise resignation, gains were reversed and we’re back around 1.4900 this morning.

The euro remains the dog and all this after its relief rally back up to 1.3000 it didn’t take long for the bears to bring us sharply back down again and so this morning we’re at 1.2650.  Despite the massive bailout, it doesn’t really change the fact that the PIIGS are struggling and the euro is overvalued.  Now that the 1.3000 level has been smashed, the medium-term bears will be looking for a run at the 1.2500 next and below there 1.2300.

Questions are also hanging over the Aussie dollar, as it has failed to gain traction above and beyond the 0.9300 area, and there are fears that the RBA is near the end of its interest rate-hiking cycle.  Quite a few long positions have been unwound and bears will be looking for a test of the February lows around 0.8600, in particular if further equity market weakness sets in.

The recent volatility of the fast few weeks have served to benefit the price of gold, which so nearly marked a new record high yesterday.  Buyers are few and far between at these levels, but a break above here 1226 will have the bulls aiming for 1234, then 1240 and over the longer-term 1278.  Looking at the longer-term chart, the bull-run for gold still looks healthy, but the higher it gets, the more prone it will become to sharp corrections to the downside.  Buying at these levels now requires quite deep pockets, certainly if you want to buy the physical!

After yesterday’s mild decline for crude prices this morning, Nymex is at 75.80, as it continues to hover just above $75.  Oil seems to have detached itself from movements in gold and the fears of the effect that sovereign debt problems will have on the wider global economy is taking its toll.