Sterling at two-month low against the euro
THE pound fell to the weakest against the euro in two months as a report showed the UK's budget deficit widened more than forecast in August, raising the prospect of deeper government spending cuts.
The British currency touched a six-day low versus the dollar and UK government bonds rose. The Bank of England will release minutes of its last interest-rate meeting today.
"Public finances are a risk to sterling, which is vulnerable to a further drop against the euro at these levels," said Henrik Gullberg, a currency strategist at Deutsche Bank AG in London.
"If the Fed opens the door to further quantitative easing then that could signal other central banks are also willing to do something and the next would be the Bank of England."
The pound weakened 0.5pc to 84.45p per euro in London, after earlier depreciating to 84.70p, the weakest since July 21. Sterling was little changed at $1.5550 and 0.3pc lower at 132.77 yen.
Britain posted the largest budget deficit for any August since records began in 1993, the Office for National Statistics said yesterday. Net borrowing was £15.3bn (€18bn), compared with £13.5bn a year earlier. The median of 15 forecasts in the survey was a shortfall of £12.5bn. (Bloomberg)