The pound fell sharply against the euro yesterday, losing around 2 cents following news from the British Debt Management Office, which conducts UK Treasury bond auctions, that there weren’t enough interested buyers for the UK government’s £1.75 billion gilt auction. This is the first time in almost seven years that such an auction has failed, which puts Prime Minister Gordon Brown in a precarious position. The British government plans to sell a record £146.4 billion worth of gilts this year and up to £147.9 billion next year to pay for the tax cuts and fiscal spending intended to dig the UK out of recession. But with demand seeming lackluster it may become increasingly difficult and more expensive for the government to fund its economic recovery efforts.
Sterling was also undermined yesterday by a sharper than expected fall in the Confederation of British Industry's distributive trades survey balance.
M3 Money Supply figures are released in the eurozone this morning, while Retail Sales figures are due from the UK today.
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