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Pound breaks 26-year dollar high Pound powers past weaker dollar
(about 3 hours later)
Both the pound and the euro have risen to further highs against the dollar, on growing expectations of a cut in US interest rates. The pound's recent run of strength against the US dollar has continued, with sterling again rising to its highest levels since 1981.
With the Federal Reserve tipped to trim US rates later on Wednesday, the pound hit a 26-year high of $2.0743 in early trading before pulling back to $2.0718. Gains were fuelled by speculation that the Federal Reserve will trim US interest rates for a second time in two months later on Wednesday.
Meanwhile, the euro touched $1.4467, its fourth all-time high, before falling to $1.4443 by 1100 GMT. The pound hit a 26-year high of $2.0743 before pulling back to $2.0719 after US economic figures beat market forecasts.
The value of the pound has been further strengthened by upbeat UK housing data. Analysts said they still expected a rate cut despite the good data.
US economic woes "Dealers are showing no hesitation in selling the dollar against the euro as they think the Fed is likely to go for more rate cuts, even after the one expected today," said Tsutomu Soma, senior manager of foreign securities at Okasan Securities.
Analysts said the figures, showing that UK house prices rose sharply in October, made it even more likely that the Bank of England would keep UK rates on hold at 5.75% at its meeting next week. Niels Christensen, FX strategist at Nordea in Copenhagen, added: "Everybody is looking for a US rate cut this evening and selling the dollar across the board."
The euro has also been gaining against the US currency, and touched $1.4467, the fourth-highest level in its history.
Economic woes
The US has been beset by problems in the housing market, making a rate cut more likely as the Fed tries to stimulate the market and economy.
By contrast, the UK market has been much more robust and a report on Wednesday showed that prices rose sharply in October.
That made it even more likely that the Bank of England would keep UK rates on hold at 5.75% at its meeting next week, analysts said.
Dealers are showing no hesitation in selling the dollar against the euro Tsutomu Soma, Okasan Securities.Dealers are showing no hesitation in selling the dollar against the euro Tsutomu Soma, Okasan Securities.
Taken together with the expectation that the Fed will cut US rates later on Wednesday from the current 4.75%, this makes the pound more lucrative than the dollar for investors.Taken together with the expectation that the Fed will cut US rates later on Wednesday from the current 4.75%, this makes the pound more lucrative than the dollar for investors.
The Fed is under pressure to reduce US interest rates further to help boost the struggling housing market, amid growing signs of weakness in the wider economy.The Fed is under pressure to reduce US interest rates further to help boost the struggling housing market, amid growing signs of weakness in the wider economy.
A key report showed on Tuesday that US consumer confidence declined for the third month in a row in October to its lowest level in two years.A key report showed on Tuesday that US consumer confidence declined for the third month in a row in October to its lowest level in two years.
The Fed cut its benchmark interest rate to 4.75% from 5.25% in September.The Fed cut its benchmark interest rate to 4.75% from 5.25% in September.
'Mass selling'
"Dealers are showing no hesitation in selling the dollar against the euro as they think the Fed is likely to go for more rate cuts, even after the one expected today," said Tsutomu Soma, senior manager of foreign securities at Okasan Securities.
Niels Christensen, FX strategist at Nordea in Copenhagen, added: "Everybody is looking for a US rate cut this evening and selling the dollar across the board."
The pound still has some way to go before it beats the $2.40 highs seen in 1980 and 1981.
The latest UK house price data came from mortgage lender Nationwide.The latest UK house price data came from mortgage lender Nationwide.
It found that house prices rose at an annual rate of 9.7% in October, up from September's 9% gain.It found that house prices rose at an annual rate of 9.7% in October, up from September's 9% gain.
The pound still has some way to go before it beats the $2.40 highs seen in 1980 and 1981.