Sterling extends gains into third day on better housing data

LONDON: Sterling rose for a third straight day against the dollar on Thursday, helped by an unexpected rise in house prices which backed views that demand in the British economy was holding up.

Halifax said house prices rose by 2.0 percent in January, up from a 1.1 percent increase in December and far outstripping the 0.1 percent average increase forecast in a Reuters poll.

The data came after a better-than-expected survey of Britain's dominant services sector that pointed to robust economic growth for 2015.

"UK housing demand should continue to be helped by an expanding economy, low mortgage rates, and lower inflation," said a spot currency trader in London. "That is putting a bid for sterling/dollar."

The pound was up 0.3 percent at $1.5229, having hit a three-week high of $1.5251 struck on Wednesday. Against the euro, sterling was flat at 74.70 pence.

Sterling has been buoyed by a slew of good data this week.

The Purchasing Managers' Index (PMI) surveys for the services, manufacturing and construction sectors all showed better-than-expected growth and suggested that economy was growing at a rate slightly above the 0.5 percent it managed in the final three months of 2014.

The Bank of England will announce a rate decision later in the day. It is widely expected to hold rates at 0.5 percent and that is unlikely to move the currency. The BoE has turned slightly pessimistic about the UK economy given subdued wage growth, inflation and risks from a euro zone slowdown.

Investors are also likely to be cautious on the pound ahead of a parliamentary election in May that could open the door to a referendum on Britain leaving the European Union.

"The countdown toward the UK general election sits at 91 days, leaving time aplenty for political uncertainty," said Alfonso Esparza, senior currency analyst at Oanda. "The BoE will likely wait until after the election to start hiking rates if the state of the economy calls for it."

Sterling has fallen around 11 percent against the dollar in the past six months as investors have pushed back expectations of when the BoE will start raising interest rates.