LONDON: Sterling fell to a 14-month low against the dollar on Thursday, as weak UK housing data added to growing doubts that interest rates would rise any time soon, a day after a cautious message from the Bank of England.
The monthly RICS house price survey showed British property values growing at their weakest in 18 months - until recently many had thought the UK's property market was bubbling over and had used it as an argument for raising rates.
The Bank of England said on Wednesday that inflation was likely to fall further, pushing back bets on the first post-crisis interest rate hike to the end of 2015.
Traders said that although investors had already pushed their expectations for a rate rise well into next year, Governor Mark Carney's comments on markets being right to expect easier monetary conditions in the coming months served to stamp out any lingering idea that hikes could come sooner rather than later.
"Unless sterling recovers over the next couple of days, it's in for a tough time over the next week or two," said Ian Gunner, a currency portfolio manager at Altana Wealth.
"Some banks were expecting something slightly more hawkish ... and by not veering down that route he (Carney) pulled the rug out from under sterling," Gunner said, adding that the pound could get a further kicking if U.S. retail sales data due on Friday come in strong.
The pound fell to $1.5725, its weakest since September last year. Against the euro it weakened to a three-week low of 79.35 pence per euro, down 0.6 percent on the day.
In contrast to the picture in Britain, the head of the New York Federal Reserve, William Dudley, said earlier on Thursday that market expectations for an increase in U.S. rates in the middle of 2015 seemed reasonable.
That raises the prospect that the UK will be beaten as the first major central bank to raise interest rates since the financial crisis - a title it was widely expected to win until the summer.
"Sterling looks like it will continue to be sold (against the dollar) on any strength," said Angus Campbell, senior analyst with retail currency trading platform FxPro.
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