The British pound fell to around $1.34, its lowest in a week, after data showed the UK government borrowed 7.2 billion GBP more than forecast in the first half of the fiscal year, underscoring the tough fiscal challenge facing Chancellor Rachel Reeves ahead of the November 26 budget. The budget deficit hit 99.8 billion GBP, above the 92.6 billion GBP projected by the OBR, as debt-interest costs surged 66% to 9.7 billion GBP in September, the highest for that month on record. The deterioration, driven by high inflation, rising welfare costs, and weak tax receipts, raises fears that Reeves may need up to 35 billion GBP in spending cuts or tax hikes to meet his fiscal rules. Economists warned that borrowing could reach 5% of GDP this year, complicating fiscal plans and weighing on investor confidence. Meanwhile, the pound also weakened as BoE Governor Andrew Bailey said the economy is operating “below potential” and unemployment rose to 4.8%, reinforcing bets on a rate cut by early 2025.