Sterling plunges to 1.17 against the euro

The Office for National Statistics (ONS) announced that public sector net debt rose to £14.5bn, a record 63.9 per cent as a percentage of gross domestic product (GDP).

The public sector also posted a record cash requirement figure of £20.9bn in June, up from £20.213bn in June 2009.

The latest figure exceeded economist’s expectations for a fall to £15bn.

In response to the data, sterling fell to a session low against the euro and fell 0.4 per cent against the US dollar, to $1.5219.

Tiffany Burk, European market analyst at Travelex Global Business Payments, said the figures were the biggest public sector net cash requirement for June since records began in 1984 and helped to send the pound lower in trading this morning.

She said: "No doubt the data will toughen the coalition’s resolve to persevere with the swingeing spending cuts and tax hikes they have planned.

"The downside to sterling is limited because risk appetite remains positive in broader markets.

"Equity markets are trading higher and investors remain optimistic over the release of the upcoming stress tests for the 91 European banks.

"This confidence is helping to support risk appetite."