Britain slashed its official forecasts for economic growth and expects to borrow sharply more going into the next decade, finance minister Philip Hammond said.

Forecasters now expect gross domestic product will grow by 1.5 percent in 2017, compared with a forecast of 2.0 percent made in March.

The pound dropped to as low as $1.3213, down 0.2 percent, and down from around $1.3241 before Hammond began speaking. It then edged a little higher to trade at $1.3230, down 0.1 percent on the day.

"The FX market looks a little disappointed in the downward trajectory for growth without any bazooka of fiscal stimulus - sterling is trading lower on this," said Mizuho's head of hedge fund FX sales, Neil Jones.

"We were waiting for some fiscal measure to counter the lower growth forecast - that's not happened."

Britain's internationally focused FTSE 100 added to gains as the pound fell, last up 0.6 percent and close to a session high.

Gilt futures initially rose as Hammond presented the budget but pared those gains after he outlined a heavier borrowing forecast for the years ahead.

Gilt future were last trading flat on the day at 125.09 , while the 10-year gilt yield was steady at 1.275 percent.