First the UK had the finances of an emerging market. Then it seemed to have the politics too. For a brief moment on Thursday, rumours swirled through currency markets that Gordon Brown, the prime minister, had resigned or been ousted in a cabinet rebellion.

Sterling swooned by 1.3 per cent against the dollar. Then Downing Street said talk of Mr Brown resigning was “absolute rubbish”.

That didn’t help the pound much. By the end of the day, sterling had gone, possibly assisted by a large piece of mergers and acquisitions finance flowing through the foreign exchange market. But Mr Brown hadn’t – yet.

Other markets, though, were less fussed. The FTSE 100 closed flat, as did other European equities. Benchmark government bonds dipped, but credit default swaps on UK sovereign debt tightened by 7 basis points. If this was a classic emerging market crisis, bonds would have dived, credit default swap spreads exploded and the currency collapsed. News cameras would then have captured a bowed prime minister in their unflattering glare as he headed out the door.

In fact, the opposite has happened during much of the financial meltdown. Last year, the government’s popularity increased even as sterling fell through the floor. In December, voters caught up with broader investor concerns about the steep rise in public spending and the possibility of a sterling crisis that this could bring.

Since then, Mr Brown’s popularity has sunk. Yet, oddly, sterling has gained.

Since the expenses scandal broke in early May, the trade-weighted pound has even strengthened by 6 per cent. There are many reasons why this might be. But a growing belief that Mr Brown’s increasing unpopularity will force an early election and that the opposition, which has talked tough about cutting spending, will win, cannot have hurt.

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