Sterling shed more than a cent in value against the dollar on Tuesday as investors fretted that weaker-than-expected house price data could mean fewer UK interest rate hikes in the future.
The pound also fell against the euro, even though the euro had lost ground versus the dollar. Relatively high UK interest rates have been a key factor supporting the pound in recent months. But investors are wary of any soft signs in the economy and signals of slowdown in the housing market that could limit the pace of future tightening.
Tuesday's data was seen as one such sign after the Royal Institute of Chartered Surveyors (RICS) said early on Tuesday that in the three months to June house prices in Britain rose at their slowest pace in 10 months.
"The house price development data is obviously watched and the RICS data were pretty weak, which took some steam off the money market," said Hans-Guenter Redeker, chief fx strategist at BNP Paribas in London.
At 1340 GMT sterling traded 0.8 percent down on the day at $1.8533, and about 0.15 percent weaker at 66.65 pence per euro. On Monday the pound hit its highest level against the dollar since late February at $1.8765.
Short sterling rate futures were up in early trading in reaction to the RICS numbers, but record mortgage lending figures released later and reluctance to take bets ahead of Federal Reserve Chairman Alan Greenspan's testimony on Tuesday wiped out those gains by late afternoon.