LONDON: Sterling fell below $1.60 for the first time in two weeks on Thursday after the US Federal Reserve adopted a slightly less cautious tone on policy and data showed Britain's housing market losing some momentum.
In a show of confidence in the US economy's prospects that sent the dollar higher, the Fed on Wednesday ended its $4 trillion bond-buying programme and dropped a reference to US labour market slack as "significant".
The spread between two-year British government bond yields and their US equivalent narrowed to its lowest since January, also boosting the dollar at the expense of sterling.
Having traded as high as $1.6161 on Wednesday, sterling fell 0.7 percent after the Fed released its statement and a further 0.2 percent on Thursday, to trade at $1.5975.
Data released on Thursday showed British house price growth easing for a second month in a row in October, adding to evidence that the once red-hot property market is cooling.
That followed numbers on Wednesday that showed British lenders approved the fewest mortgages in more than a year last month.
But traders said sterling's move lower against the dollar was mainly down to the Fed's statement.
"It's really nothing to do with sterling, it's all dollar strength at the moment on the back of the FOMC meeting last night - not because the statement was particularly hawkish, but because the market was positioned for a very dovish one," said John Hardy, a currency strategist at Saxo Bank.
Against the euro, the pound strengthened by 0.3 percent to 78.69 pence, as the single currency struggled ahead of German inflation numbers later in the day.
Hardy said sterling was being contained by the fact that UK wage growth remained weak and that the British economy was suffering knock-on effects from the faltering euro zone.
The pound has been weighed down this week by dovish comments from Bank of England policymakers, who have emphasised that the central bank would leave rates near their record low level for longer on the basis of low inflation and slack remaining in the labour market.
Minutes released last week from the BoE's latest monetary policy meeting showed MPC members were against raising rates for now, pointing to weak price pressures at home and a slowdown in the euro zone, Britain's most important export market.
Sterling had reached a six-year high against the dollar in mid-July on expectations that the BoE would start hiking interest rates by the end of this year.
But those bets have since been pushed well back, with many now not expecting rates to rise until the second half of 2015.
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