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Pound heads for worst week since mid-May as public debt surges
[LONDON] Sterling was on track for its worst week since mid-May after fresh data on Friday showed government borrowing had hit record highs, more evidence that the coronavirus-stricken economy was a long way from recovering.
The UK's public debt exceeded economic output for the first time since 1963, when Britain was still paying off debt from World War Two.
"UK public sector finances for May show how heavy the cost of the pandemic has been in the first two months of the fiscal year," said Kit Juckes, chief global FX strategist at Societe Generale.
The pound was down 0.2 per cent against the dollar at $1.2407 by 12.48pm GMT (8.48pm SGT), after touching $1.2361 earlier, its lowest since June 1. Against the euro, the pound was last down 0.5 per cent at 90.66 pence, a three-month low.
The euro recouped some early losses against the dollar as European Union (EU) leaders discussed regional divisions over a 750 billion-euro (S$1.17 trillion) coronavirus recovery fund.
"We still think EUR/GBP is likely to spend most of the next few months above 0.90," Societe Generale said in a note.
The pound rose briefly on Friday on data showed retail sales rebounded in May more than expected after April's slump.
Sterling had slumped more than 1 per cent against both the euro and the dollar on Thursday after the Bank of England increased its bond-buying programme by £100 billion (S$173.85 billion) to bolster the coronavirus-hit economy.
Brexit-related risks also continued to weigh on sterling. British Prime Minister Boris Johnson told visiting French President Emmanuel Macron on Thursday that talks on a post-Brexit deal cannot drag on into the autumn.
German Chancellor Angela Merkel also said the EU and Britain need to reach a deal by the autumn. Britain left the EU on Jan 31, but talks on future relations have so far made little progress.
On a brighter note, Britain's chief medical officers said the Covid-19 threat level should be lowered one notch.