Sterling eased against the dollar on Tuesday, with investors fretting about the toxic mix of surging inflation and slowing growth that has tied the Bank of England's hands in terms of monetary policy. Adding to glum sentiment on the UK economy, a Hometrack survey released on bank holiday Monday showed house prices in England and Wales falling for an eighth month in May.
While Tuesday's data featured a near 40 percent year-on-year slump in April's mortgage approvals for new homes. In contrast, the dollar was lifted by slightly stronger than expected US new home sales data and by the retreat in oil prices from record highs."There are long term fears for the UK economy - in terms of what the housing effect will be, tight credit markets. (So) the unwillingness to cut rates because of inflation worries, rather than supporting the currency, it's hurting it a bit because people fear a hard landing," said John Hardy, FX strategist at Saxo Bank.
By 1422 GMT, sterling was down 0.4 percent at $1.9742, while the euro edged up to 79.66 pence. No first-tier UK data is due on Wednesday, leaving sterling free to take direction from moves in euro/dollar, equities and the oil price.
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