* FinMin says UK will miss debt, growth targets
* May raise concerns about QE, UK rating downgrade
* Pound off earlier one-month low versus euro
* PMI data shows UK services sector growth slows
By Philip Baillie
LONDON, Dec 5 Sterling edged up from one-month
lows against the euro on Wednesday after a gloomy UK budget
statement which traders said was in line with expectations.
But forecasts from finance minister George Osborne that
Britain would miss its debt-reduction and growth targets left
the currency looking vulnerable.
Analysts said the poor UK economic outlook might revive
prospects of more monetary easing by the Bank of England and
increase the risk of a credit agency cutting the UK's top-notch
rating, both of which would be negative for sterling.
The euro was down 0.2 percent against the pound
at 81.18 pence, easing back following Osborne's autumn budget
statement having earlier hit a one-month high of 81.45 pence.
Some analysts said the euro could soon test its late October
peak of 81.65 pence.
"Sterling has not reacted much after the statement - it has
been caught up in the crossfire in other currency pairs," said
Adam Cole, global head of FX strategy at RBC Capital Markets.
The pound was steady against the dollar at $1.6094,
though traders said reported offers ahead of $1.61 may stem its
rise. It remained relatively close to a one-month peak of
$1.6131 hit on Tuesday, with traders reporting buying of the
pound from a supranational.
Earlier in the session, the pound barely reacted to a survey
showing Britain's service sector grew at its slowest pace in
nearly two years in November. The purchasing managers' index was
below forecasts but still just above the 50 level, signaling
The lower growth forecasts could open the way to more bond
purchases by the Bank of England, which meets on Thursday, said
Audrey Childe-Freeman, head of foreign exchange strategy at BMO
Markets in London.
The BoE's Monetary Policy Committee is expected to hold
interest rates at 0.5 percent on Thursday and keep quantitative
easing at 375 billion pounds, but there is a chance it may opt
for more QE next year.
Citibank economist Valentin Marinov said in a note to
clients that markets will be wary ahead of a review by credit
agency Moody's of the country's sovereign rating in early 2013.
"I still expect that the UK will be able to maintain its AAA
rating and sterling should continue to serve as a safe haven
proxy for the euro. A potential downgrade, not my central case,
could see sterling some of its attractiveness vis-a-vis the
single currency," he said.