Sterling fell broadly on Thursday, dented by figures showing an unexpectedly sharp deterioration in the UK public finances, which offset firmer-than-expected UK retail sales data. The borrowing figures showed a record deficit for the month of July, the first time government accounts have been in the red in that month since 1996.
Public sector net borrowing came in at 8.016 billion pounds, substantially more than the 500 million pound deficit forecast and a sharp contrast with a surplus of more than 5 billion pounds in July last year. Sterling had initially risen on news that British retail sales rose 0.4 percent in July, twice as fast as expected, but quickly erased those gains and turned lower as attention switched to concerns over the UK's parlous fiscal situation.
"In a nutshell the public finances figures were awful, and the UK economy is looking very shaky," said Maurice Pomery, managing director at Strategist Alpha. At 1501 GMT, sterling fell 0.3 percent against the dollar to $1.6485, having briefly risen to a session high of $1.6611 in reaction to the retail sales figures. The euro gained 0.3 percent against the pound to 86.33 pence, having earlier dropped as low as 85.73 pence. Sterling's broad losses took the currency's trade-weighted index down 0.2 points to 82.8.
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