LONDON: Sterling fell against the dollar for the first time in four days on Thursday, as a sell-off seen in the greenback waned and on expectations that interest rates in Britain will stay lower for longer.
Fresh evidence that the housing sector was moderating was also keeping the currency under pressure. British house prices grew at their slowest rate in a year and a half during the past three months, a property industry body said on Thursday.
The Royal Institute of Chartered Surveyors said its monthly house price index sank to +13 in November, down from +20 in October.
The pound, though, surged to a six-year high against the Norwegian crown after Norway's central bank surprised investors by cutting the benchmark rate to 1.25 percent, leaving to a broad sell off in the Norwegian crown.
While Norway's central bank said there was potential for further cuts, investors in Britain are expecting the next move from the Bank of England to be a rate hike. Investors, though, are not expecting the BoE to raise rates before the Federal Reserve, leaving the pound underperforming the dollar.
Sterling was down 0.3 percent against the dollar at $1.5660 , while against the euro too, the pound was a tad lower. The euro was up 0.2 percent at 79.83 pence.
"The housing data means the BoE will keep rates lower for longer and that is weighing on the pound to an extent," said Nawaz Ali, analyst at Western Union. "A lot depends on how U.S. retail sales data is later in the day and how the European Central Bank's loan offer goes."
The ECB allotted banks 129.8 billion euros of ultra-cheap, four-year loans as part of a package of measures to add around 1 trillion euros to its balance sheet - a goal it has set with a view to pumping money into the economy to save it from deflation.
The figure was in line with market expectations and will keep the pressure on the central bank to take further action to boost the ailing euro zone economy.
Traders will also eye any comments on monetary policy from BoE Governor Mark Carney. The BoE announced big changes to the way it provides information about its monetary policy decisions, saying it would publish minutes of discussions alongside interest rate announcement from August 2015.
Carney said on Wednesday UK rates will have to be increased despite an expected dip in inflation, but that the exact timing of the first hike since 2007 is uncertain and tightening is likely to be gradual.
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