NEW YORK (Bloomberg) — The pound declined for a second week against the dollar on concern the recovery has yet to take hold and as investors bet the government isn't acting fast enough to cut the budget deficit.

Reports this week showed inflation slowed more than forecast last month and business investment had the biggest annual drop on record in the fourth quarter. A ComRes Ltd. survey conducted after Chancellor of the Exchequer Alistair Darling's budget speech on March 24 showed the government moved ahead of the Conservatives on who voters trust most to run the economy. Other polls signalled an election that must be held by June will leave the government without a parliamentary majority.

"I don't see much that could cause a massive appreciation in the pound," said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. "The market doesn't like political uncertainty and is happy to remain short," betting that the pound will decline, he said.

Sterling depreciated 0.9 percent in the week to $1.4876 as of 5.38 p.m. in Londonon Friday, and traded as low as $1.4799, its weakest level since March 1. It fell against the dollar in three of the five trading days. Against the euro, the pound was little changed on the week at 90.08 pence.

Britain's currency lost eight percent versus the dollar this year amid speculation the election will produce a government too weak to reduce the deficit, which at 11.8 percent of gross domestic product is the highest among the Group of Seven nations. Darling said in his March 24 budget report that the government plans to cut the deficit to £89 billion ($132.7 billion) by 2014, from £167 billion this fiscal year.

The pound may extend losses next week on speculation a report from Nationwide Building Society will show house-price gains slowed this month. Prices probably rose 8.2 percent in March from a year earlier, down from 9.2 percent in February, according to the median of 12 economists surveyed by Bloomberg.

Business investment in equipment, vehicles and buildings dropped 23.5 percent from a year earlier, the biggest decline since records began in 1967, the Office for National Statistics said on its website on Friday. The annual inflation rate declined to three percent in January, the statistics office said March 23. Economists predicted a 3.1 percent rate, according to a Bloomberg survey.

UK 10-year government bonds fell this week, sending the yield seven basis points higher to 4.02 percent, even after the Debt Management Office said gilt sales will drop 18 percent this year. The UK will issue £187.3 billion of securities in fiscal 2010/2011, down from the record £227.6 billion last year, the London-based debt office said.

"In the medium to long term, there's still a question mark on how the new supply will be absorbed," said Karsten Linowsky, a fixed-income strategist at Credit Suisse Group AG in Zurich. Investors should favour German bunds over gilts in the next 12 months as long as the Bank of England decides not to resume bond purchases, he said.

Gilts returned 0.4 percent in the year through March 25, compared with 2.4 percent for bunds, according to Bank of America Merrill Lynch indexes.