Concern over British fiscal instability weighed on sterling yesterday as it moved lower against the USD

Sterling continued its downward trend against the US dollar, edging lower as sentiment weighed on the fiscal health of the UK economy.

• The pound dropped to its lowest level in almost two months at $1.6169 as the UK government's pre-Budget report focused attention on the health of the country's finances.
  
• Concerns over government debt have come to the fore in recent days following a downgrade of Greece's credit rating by Fitch, the ratings agency.
  
• This has weighed on sterling, given the possibility that the UK may face a similar fate if it does not get its public finances in order
  
• The government's report deemed it too early to begin an assault on the UK's budget deficit, however, because of fears that deep spending cuts could choke off an economic recovery.
  
• The pound did recover some of its steep losses though as US equity markets enjoyed a slight rally later in the day lending support to the weakened UK currency.
  
• In trading this morning, the pound is continuing to move lower as investors await the BoE's rate decision. The market is widely expecting to see rates hold at 0.50%.