The pound sterling depreciated against the dollar for the second straight week

The pound sterling depreciated against the dollar for the second straight week as economic data stoked concern the recovery may be slower.

The pound headed for weekly decline against 16 of its most actively traded counterparts. The pound hit a three-month low against U.S. currency December 22 as the Office for National Statistics said gross domestic product grew by 0.7 percent in the three months to September, below the initial estimate of 0.8 percent announced in October. Second quarter growth was revised downward to 1.1 percent from 1.2 percent. The budget deficit rose to a record of approvals and home loans fell to the lowest since March 2009.

"It was not the best race of the data in the course of the last session and the pound is looking a little softer," said Jeremy Stretch, executive director of foreign exchange strategy at the Canadian Imperial Bank of Commerce London. "The GDP data was a bit disappointing, and does not provide a lot of positivity to be the end of the year."

The pound was little changed at $ 1.5440 as of 12:40 pm in London. That is a decline of 0.7 percent from $ 1.5533 on 17 December. It reached $ 1.5356 on 22 December, its lowest level since 14 September. The UK currency was at 85.05 pence per euro from 84.91 pence a week ago.

Published data showed 21 December, the deficit of the United Kingdom in November rose to a record budget. Net public debt rose to 22.8 million pounds, up from 16.7 million pounds a year earlier, said the ONS. The growing gap highlights the challenge facing the prime minister, David Cameron and his government is prepared to implement deeper cuts in spending since World War II.

Home Loans

A report by the British Bankers Association showed on December 23 UK banks granted 29,991 mortgages in November, compared with 30,689 the previous month. That was the lowest number of mortgage approvals since March 2009 when the economy was in the depths of the recession, according to the data.

"The housing market is showing signs of recovery in the short term fiscal consolidation likely to weigh," said CIBC stretch.

The pound has lost 1.1 percent in the last week, which track a basket of 10 currencies of the developed countries.

Since late 2009, the British currency has lost 6.4 percent, compared with a decline of 10.5 percent for the euro and a loss of 1.4 percent for the dollar.

The UK currency dropped their declines as Bank of England markets director Paul Fisher said in an interview on 23 December that interest rates may rise to a "standard position" of about 5 percent.

"It's not impossible"

"I do not think a change of 25 or even 50 basis points, will cause a recession," Fisher told the Daily Telegraph. "But we have to do is turn on the way people think that's where the rates that may come back."

The central bank official also said it is "impossible" the economy may contract for a quarter.

Minutes of the meeting of the Bank of England in December on 22 December showed that policymakers remained divided in its decision to keep the benchmark interest rate at a record low of 0.5 percent and the asset purchase program without changes in 200 million pounds.

Member of the Monetary Policy Committee Adam Posen, who has asked the bank to increase the stimulus, said last week policy makers should not "overreact" to inflation. His colleague Andrew Sentance voted to increase rates since June.

The 10-year gilt yield gained two basis points to 3.51 percent from 3.56 percent on 17 December. This is his first weekly loss in four. The yield on two-year note increased one basis point in the week to 1.21 percent.

Gilts have returned 6.7 percent this year, according to indexes compiled by the European Federation of Financial Analysts Societies . Treasuries gained 5.4 percent and Germany's debt reference values of the euro zone, returned 6.1 percent, rates of EFFAS show.