The pound declined against its major counterparts in European deals on Tuesday, as investors weighed the impact of a surprise policy shift by the Bank of Japan.

The Bank of Japan tweaked yield curve control policy on Tuesday, raising the 10-year bond yield cap to 0.5 percent from 0.25 percent.

Several economists expect that the BoJ's next move could be abandoning the negative interest rate policy in the wake of surprise tweak to yield curve control.

Data from the Office for National Statistics showed that the UK budget deficit was the biggest for the month of November.

Public sector net borrowing excluding banks increased by GBP 13.9 billion from the last year to GBP 22.0 billion. This was the biggest November borrowing since monthly records began in 1993.

The pound edged down to 1.2128 against the greenback and 159.64 against the yen, off its early highs of 1.2192 and 161.03, respectively. If the pound extends decline, 1.19 and 157.00 are possibly seen as its next support levels against the greenback and the yen, respectively.

The pound weakened to 1.1225 against the franc and 0.8760 against the euro, reversing from its early highs of 1.1299 and 0.8715, respectively. The pound is seen locating support around 1.11 against the franc and 0.90 against the euro.

Looking ahead, Canada CPI November, U.S. consumer confidence index for December and existing home sales for November will be out in the New York session.

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