Sterling reaches an eight month high against the dollar but gains fizzle out

City A.M. Reporter
STERLING hit an eight-month high against the dollar yesterday due to surprisingly strong UK house price data, but its gains fizzled out after a moderating decline in US home prices later boosted the US currency.<br /><br />Weaker-than-expected figures on UK gross domestic product also stung the pound on the view that the nation&rsquo;s economy continues to struggle, knocking sterling from its highest level of the year hit against a currency basket in early London trade.<br /><br />Trade was volatile on the last day of the quarter and half-year, and analysts said corporate demand to buy and sell the dollar for last-minute book keeping purposes was driving broader currency movements.<br /><br />Sterling initially rose more than one per cent on the day against the dollar to $1.6745, its highest since mid-October, after the Nationwide building society said house prices rose 0.9 perc ent in June, confounding forecasts for a fall.<br /><br />But dismal first-quarter gross domestic product data, which posted their biggest fall in 50 years on a quarterly basis, clipped the pound&rsquo;s rally, while the dollar&rsquo;s climb on a moderating fall US house prices exacerbated sterling losses.<br /><br />&ldquo;The UK GDP numbers were not great, so we&rsquo;ve seen a pullback in sterling as a consequence,&rdquo; said Steve Barrow, head of G10 currency research at Standard Bank.