Sterling eased from two week highs against the dollar on Wednesday after dovish minutes from the Bank of England's last policy meeting, while Chancellor George Osborne's 2012 Budget was perceived as largely neutral for the currency. Osborne was seen to be sticking with the coalition government's austerity drive which aims to bring the country's finances back into line in five years, though sluggish growth hampered by fiscal cuts remains a concern to investors.
The earlier release of much higher-than-expected public sector borrowing for February had already acted as a drag on the pound. It was down slightly for the day against the dollar at $1.5827 in afternoon trade, little changed from pre-Budget levels. The euro hit a session high of 83.72 pence after the minutes before paring gains to trade flat at 83.35 pence. The common currency had fallen to a one-month low of 82.83 pence on Monday.
"The coalition has been relatively successful in meeting its fiscal targets although there were worrying signs in this morning's February data from a revenue perspective," said Lee Hardman, currency strategist at BTM-UFJ. "It's not really a surprise that sterling hasn't reacted on the budget though as it's fairly neutral fiscally," said Lee Hardman, currency strategist at BTM-UFJ.
The Office for Budget Responsibility's forecasts for growth and borrowing detailed by Osborne were marginally more optimistic than the previous estimates in November but analysts were sceptical. The pound had retreated from two-week highs in morning trade of $1.5924 the BoE's latest policy minutes from their March meeting showed two policymakers voted for more monetary stimulus to support the economy.