An unexpectedly strong reading for UK house prices in October powered sterling to a fresh 26-year high against the dollar of more than $2.07.
According to the Nationwide Building Society, the average house price rose by a seasonally adjusted 1.1%, the highest reading since June. As a result, their index of annual house price inflation rose to 9.7%, from 9% in September.
Although the Nationwide conceded that the market is “clearly not as strong as this time last year” the latest data makes it even less likely that the Bank of England’s monetary policy committee will vote for a cut in the UK base rate from 5.75% when it holds its monthly meeting next week. Indeed Howard Archer of Global Insight now predicts that the Bank will not trim rates earlier than next February.
Dollar weakness also helped to boost sterling with expectations that the Federal Reserve will agree a 0.25% cut to 4.25% in US interest rates at the next policy setting meeting later today.