The pound fell versus the euro and dollar after the nation’s November budget deficit swelled to a record, exceeding economists’ forecasts. Sterling weakened against 15 of its 16 most-actively traded peers as a survey showed British consumer confidence stayed at a four-month low. Net government borrowing rose to 22.8 billion pounds ($35.4 billion), up from 16.7 billion pounds a year earlier, the Office for National Statistics said. The median of 12 forecasts in a Bloomberg survey was 16.8 billion pounds. “The fact that borrowing costs have surged does highlight the tough task that the coalition government actually has,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. The Bank of England is “going to have to remain reasonably loose on monetary policy, and I think that probably in the medium term undermines sterling.” The pound dropped 0.4 percent to 85.01 pence per euro as of 11:54 a.m. in London. Sterling fell 0.2 percent against the dollar to $1.5477 after earlier rising as much as 0.4 percent. The pound has lost 1.1 percent in the past week, according to Bloomberg Correlation-Weighted Currency Indexes, which track a basket of 10 developed-country currencies. Since the end of 2009, Britain’s currency has lost 5.9 percent, compared with a 10.1 percent decline by the euro and a 1.2 percent loss by the dollar. Government spending rose the most since February, and the shortfall excluding government support for banks was 23.3 billion pounds. The burgeoning deficit underscores the challenge facing Prime Minister David Cameron as his government prepares to implement the deepest spending cuts since World War II. Consumer Confidence There was a public-sector cash requirement of 16.8 billion pounds in November, compared with 14.8 billion pounds a year earlier. Economists predicted 12.3 billion pounds. The central- government cash deficit, the measure the Treasury says most closely indicates gilt sales, was 14.4 billion pounds. Net debt was at 58 percent of gross domestic product, up from 50 percent a year ago. A separate report from researcher GfK NOP showed an index of U.K. consumer sentiment was at minus 21, unchanged from November, which was the lowest level since July. Minutes of the Bank of England’s December Monetary Policy Committee meeting are due tomorrow. The minutes will likely show policy makers remained split in their decision to maintain the key interest rate at a record low 0.5 percent and to hold the asset-purchase program at 200 billion pounds. MPC member Adam Posen, who has called for the bank to increase stimulus, said last week policy makers shouldn’t “overreact” to inflation. His colleague Andrew Sentance has voted to increase rates since June. Government bonds slipped, with the 10-year gilt yield gaining one basis point to 3.50 percent. The two-year yield rose two basis points to 1.20 percent. Gilts returned 6.7 percent this year, according to indexes compiled by the European Federation of Financial Analysts Societies and Bloomberg. Treasuries gained 5.7 percent and German debt, the euro-area’s benchmark securities, returned 6 percent, the EFFAS indexes show. To contact the reporters on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net; Emma Charlton in London at echarlton1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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