Sterling fell on Thursday after Britain's public finances for January turned out much worse than expected, adding to concerns over the government's borrowing targets. Figures showed Britain posted its first budget deficit for the month of January since records began in 1993. Analysts had forecast a surplus of 2.8 billion pounds.
British gross mortgage lending was also weak, falling to the lowest monthly total since February 2000. "The UK public finances numbers are dreadful, plus the mortgage lending figures were bad too and sterling could continue to come under pressure," said ING currency strategist Tom Levinson.
At 1450 GMT sterling was down 0.4 percent versus the euro at 87.10 pence after falling to 87.22. The pound was down 0.1 percent against the dollar at $1.5650 after falling to $1.5557 in earlier trade. Traders said Asian sovereign dollar sales had helped to cushion the pound versus the greenback in afternoon trade.
Sterling was generally weaker versus a basket of currencies trading down 0.5 percent at 80.10. A general election must be held by June. Opinion polls give the opposition Conservatives a lead over Prime Minister Gordon Brown's Labour Party. "The deficit raises questions as to whether the Government will meet the Pre-Budget Report borrowing target of 177.6 billion pounds. There is now a chance that we will see an overshoot in borrowing this year," said NAB analysts in a note.
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