Sterling fell to a 6-1/2 month low against the dollar on Friday as the greenback rallied across the board on expectations that US interest rates are set to rise further. The dollar hit a seven-month high against the euro as a recent run of strong US data reinforced the view the Federal Reserve would raise interest rates steadily. In contrast, investors are pricing in the possibility of a British interest rate cut following weak economic data. The Bank of England raised interest rates five times between November 2003 and August 2004.
"Sterling is being hit by the general dollar rally. Sterling sentiment has also been undermined by bad UK economic news, which has caused markets to change their view on UK rates," said Geraldine Concagh, economist at AIB Group Treasury in Dublin.
"This week's numbers have done little to dispel this. It looks like rate differentials will move in the dollar's favour for the time being."
By 1430 GMT, the pound had fallen half a percent on the day to a low of $1.8246. Against the euro it stood at 68.77 pence, near Thursday's seven-week low of 68.97.
Britain's underlying public borrowing was lower than expected last month as government tax receipts far outpaced a small increase in spending, data showed on Friday. Public sector net borrowing was 1.3 billion pounds in April compared with 2.8 billion pounds in the same month a year ago.
Mortgage lending by British banks slowed in April to its weakest pace in more than three years, the British Bankers' Association said.
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