The UK currency was unable to hold above 1.65 against the dollar in early Europe on Tuesday and weakened towards the 1.6420 region.
The latest government borrowing data provided some degree of initial relief with a figure of GBP13bn for June after a revised GBP18.6bn the previous month and compared with expectations of a GBP16bn shortfall.
This was still sharply higher than the GBP7.5bn recorded the previous year and overall debt fears will remain an important issue as the budget deficit is heading towards 14% of GDP for the current fiscal year.
Bank of England Deputy Governor Bean stated that second-quarter GDP was also certainly negative. Markets will remain very sensitive to growth considerations as any evidence that a recovery is stalling would reinforce debt fears and increase downward pressure on the currency.
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