Barclays analysts also downgrade outlook for the pound over fiscal concerns. But - a group of leading economists back the governments fiscal management.
The British Pound is enduring fresh losses in light of the current state of the UKs fiscal position.
The pound euro exchange rate and the pound dollar exchange rate are both sharply lower in morning trade in London.
The GBPUSD is 1.645% lower with 1 GBP = 1.5364 USD.
The GBEUR is 0.748% lower with 1 GBP = 1.1387 EUR.
"The British Pound exchange rate declined heavily against the U.S Dollar yesterday, falling to a low of $1.5373 during the Asian trading session. The UK currency also lost 1% versus the Euro, amid speculation that the UK's fragile economic recovery will trail that of the U.S, as Britain recorded its first budget deficit for January since monthly data began in 1993," reports Adam Solomon at corporate FX specialists TORfx.
Government spending exceeded revenue by 4.3 billion last month and the Pound fell after the release showed Britain failed to generate a surplus in the biggest tax collection month of the year, as the health of public finances around Europe attract investor scrutiny.
James Knightly, an economist at ING Financial Markets, said that "this is potentially very worrying. Given concerns about public deficits around Europe at the moment, this could put the UK back in the spotlight."
Barclays bank also downgraded their view of the British Pound in light of the fiscal position the UK finds itself in.
The British currency will trade at $1.53 and 88 pence per euro in three months and $1.67 and 84 pence in 12 months, Paul Robinson, a foreign-exchange strategist at Barclays Capital in London, wrote in a report today.
Barclays had predicted the pound would end the year at $1.73.
Backing for Darling
Despite the beating the pound is taking in the exchange rate markets up to 60 leading economists have lent their support to the Chancellor.
More than 60 leading economists have backed Chancellor Alistair Darling over his decision to delay spending cuts until next year.
In two letters to the Financial Times, they said it could be "positively dangerous" to begin cuts - as the Tories are planning - and would risk tipping the economy back into recession.
The letters are a direct riposte to a letter sent to the Sunday Times by a group of 20 leading economists urging more rapid action to tackle Britain's £178 billion deficit.
One letter organised by Lord Skidelsky, a cross-bench peer and biographer of the economist John Maynard Keynes, accused the authors of the Sunday Times letter of trying to "frighten" the public over the scale of the deficit.
"How do the letter's signatories imagine foreign creditors will react if implementing fierce spending cuts tips the economy back into recession?" they ask. "For the good of the British public - and for fiscal sustainability - the first priority must be to restore robust economic growth."
