Sterling slips to 13-month low on debt worries

STERLING slipped to a 13-month low yesterday on fears that the incoming Liberal Conservative coalition has been bequeathed a fiscal crisis by its Labour predecessors.

The pound fell to $1.425 against the dollar, its lowest level since March last year, before paring some of its losses to trade down 0.5 per cent at $1.44.

Sterling also slipped against the troubled euro, losing 0.6 per cent to 85.51p, despite chancellor George Osborne’s promise of “aggressive” action to pay down the UK’s yawning £163bn deficit.

Giles Watt, head of equities at City Index, said the fall in sterling provided a reminder that “investors are waiting to see where the planned £6bn of budget cuts will take place and what impact additional fiscal measures will have on economic growth in the UK.”

Meanwhile, foreign demand for British sovereign debt has surged amid growing concerns over euro-denominated assets in the wake of the Greek fiscal crisis.

In the UK, foreign investors snapped up a net £20.37bn in British gilts in the three months to March – the highest amount since records began in 1982, according to Capital Data.