RTRS:Sterling hovers near two-week low vs. dollar, but UK data supportive
(Reuters) - Sterling slipped towards a two-week low against the dollar on Thursday, after the Federal Reserve sounded a slightly more upbeat tone about the U.S. economy than many had expected, supporting the struggling U.S. currency.
Data showing British house prices rose at their fastest annual pace in more than three years this month underpinned the pound at lower levels, and the UK currency rose against the euro.
Sterling shed 0.1 percent against the dollar to trade at $1.6023, having hit a two-week low of $1.5999 on Wednesday and extending losses into a fifth straight session.
The dollar index, meanwhile, has shed nearly 3 percent in the past two months, since the Fed surprisingly decided in late September not to start withdrawing its monetary stimulus.
"The Fed was not as dovish as expected. The market had expected a far more pessimistic view after the partial (U.S. government) shutdown. But that hasn't happened. So that has given the dollar a bit of a lift," said Sasha Nugent, currency analyst at Caxton.
"And while we have had good UK data, we feel that it's the U.S. side of things that will drive sterling/dollar in the near term. The Fed is still expected to taper and that will be a driving factor."
In Wednesday's statement the U.S. Federal Reserve dropped a phrase expressing concern about a run-up in borrowing costs and made no direct reference to shutdown.
In the UK, strong rises in UK house prices, combined with other strong data including a recovery in the jobs market, had led investors to bring forward expectations of when the Bank of England will raise rates.
However, these bets have been trimmed after the most recent numbers - including some forward-looking surveys - suggested the recovery may start to lose some steam and market may have run ahead of itself in pricing in rate hikes.
"We maintain our bearish view of sterling/dollar. The move below $1.6020 has triggered a bearish signal, opening the way to $1.5750," Morgan Stanley analysts said in a note.
The euro fell 0.2 percent to 85.50 pence having hit 85.85 pence on Tuesday, its strongest since late August.
