By Claire West
Data this morning has compounded sterling's problems, with public sector net borrowing recording a figure of £15.3bn in August, some way above forecast.
It is also comparatively worse than the £13.5bn seen in August last year and marks a record high for the month. Having dropped below 1.19 earlier in the session, the figure has helped edge the price down toward an eight-week low.
Surprisingly, there are a couple of positives to be taken from the data. Within the finer detail we can see that government expenditure was up on the month but there was a noticeable pick-up in tax receipts. In addition, at £55.3bn for the year to date, public sector net borrowing is still on track to meet the emergency Budget forecast of a total £149bn for this financial year.
Duncan Higgins, senior analyst at Caxton FX comments, "The figure is certainly disappointing, particularly amid the government's efforts to curb spending. However, being August's data, the fiscal austerity measures have not yet fed through to expenditure and the real test of borrowing levels will come later in the year."
"Ahead of October's spending review there is also cause for the government to be upbeat. On an annualised basis borrowing levels are still below target and with cuts already in the pipeline that target should hold."
From sterling's perspective, the figures have not offered any help. The pound is currently trading around 1.1830, representing a sharp drop below the 1.19 resistance level that had held on a number of occasions over the past couple of weeks.
In an additional note, the euro is also rallying against the US dollar as peripheral country bond yields tighten ahead of auctions in both Greece and Ireland.