THE IRA bomb that ripped through the heart of east London's commercial district this weekend may cause a knee jerk reaction when financial markets open today, but the impact is likely to be minimal, London financiers said.

Two people died and about 100 were injured when a massive car bomb planted by the IRA exploded in London's docklands district late on Friday, shattering Northern Ireland's fragile 17 month peace.

Currency, gilt and equity markets were bracing for an initial reaction, but most players did not expect the explosion to prove to be a big market moving factor. "On a social level it's a tragedy but on a financial level it shouldn't have a big impact," Mr Bob Pearce, managing director at Salomon Brothers, said.

"The markets might have a knee jerk reaction downwards but logically it shouldn't have a big impact on either the currency or the gilt market," he added.

Sterling slipped two thirds of a cent in New York trading immediately after the news on Friday. It hit a new session low against the dollar, closing at $1.5307 after opening at $1.5370, and traders said the nervousness could carry through to today. "Sterling might look a bit more wobbly," said Mr Gerard Lyons, economist at DKB International.

Political uncertainties raised by the end of a ceasefire by the IRA could weigh on the currency, he said, but he did not expect any big impact on financial markets in the short term. British stocks may come under pressure, but this should be short lived, economists said.

Most traders were more worried about the controversial Scott inquiry into British arms sales to Iraq before the 1991 Gulf War. The findings of the Scott report will be published on Thursday and are expected to strike at the heart of the Conservative government as key ministers come under attack.