Oct 22 Reuters Sterling hit a fresh 2month low against the dollar on Tuesday while investors remained focused on the central banks39; easing paths and the possible outcome of the U.S. elections.

The U.S. dollar index was just off a 212month high on expectations the Federal Reserve will take a measured approach to rate cuts, while the tooclosetocall U.S. election keeps investors on edge.

British public borrowing in the first six months of the tax year came in higher than official forecasts, data showed on Tuesday, underscoring the challenge facing finance minister Rachel Reeves in her first budget next week.

Analysts expected the UK budget to tighten spending, a move that could weaken the economy and lead the BoE to more rate cuts than markets are currently pricing.

Sterling was last down 0.05 at 1.2883, after hitting its lowest since midAugust at 1.2967.

The pound has so far benefited from the Bank of England39;s cautiously hawkish tone, signalling a more gradual cutting cycle relative to peers, while UK growth was outperforming relative to the euro area.

We think these forces rate and growth divergence will continue to weigh on the europound cross also in the coming months, said Kirstine KundbyNielsen, analyst at Danske Bank.

Longerterm, some of these pound tailwinds look set to fade, and we expect not least a more dovish BoE to eventually weigh on sterling.

The BoE39;s Megan Greene said she still believed the central bank should be cautious about cutting…