LONDON: The British pound fell more than 1% on Friday on a mix of bad news on the latest Brexit negotiations and gains for the US dollar that combined pushed sterling below $1.31.
Britain and the European Union made scant progress towards a deal on future ties in talks this week, and their chief negotiators blamed each other for the stalemate as time ticks down to an end-of-year deadline. A rising US dollar pushed the pound down 1.2% to a one-week low of $1.3059. It was also down 0.4% against the euro at 90.12 pence.
Also on Friday came news that Britain's public debt went above 2 trillion pounds ($2.65 trillion) for the first time in July as the government ramped up public spending to cope with the coronavirus pandemic and tax revenues fell. A large pile of debt, double deficits and an insecure relationship with its biggest trading partner could leave the UK vulnerable to investment outflows and money managers and investors look for better opportunities elsewhere.
And Britain's official budget forecasters raised their estimate for the size of the country's public debt pile at the end of the current financial year, after data showed earlier on Friday that it had passed 100% of annual economic output for the first time. Thin summer trading on a Friday could mean that moves may be exaggerated, however.
"The latest round of talks on a trade deal between the UK and the EU have drawn to a close with no breakthrough agreement in sight. Unless this status quo alters in the weeks ahead, EUR/GBP is likely to be pushed higher," said Jane Foley, senior strategist at Rabobank.
The pound has lost earlier strength on the back of stronger than expected economic data.
Earlier in the day the pound rose to a 1-1/2-month high versus the common currency and inched towards an eight-month high against the greenback after UK retail sales numbers for July came in much higher than expected.