Pound declines on rate speculation

The pound was weaker in relation to the euro Wednesday on fears that continuing troubles in the housing sector could make it necessary for the Bank of England to cut interest rates sometime soon.

Speculation that rates could go lower came in anticipation of a report from the Nationwide Building Society, due Thursday, which is expected to show that house prices are down again in the UK, and after house builder Taylor Wimpey (LSE: TW) reported a loss of £1.4 billion in the first half.

The pound traded at 80.19p to the euro at late morning in New York, while it took $1.8345 to buy a pound.

Meanwhile, the euro also strengthened versus the US dollar and the yen as crude oil prices saw more gains and on comments from European Central Bank officials which implied that Eurozone interest rates will not fall next year, as earlier speculation had indicated.

One official, Klaus Liebscher, said in a speech that it is more necessary now than ever to keep an eye on inflation, while ECB official Axel Weber called rate cut speculation “premature” and said in an interview that the Bank could have to raise rates next year.

In late morning trade in new York, it took $1.4712 to buy a euro while the shared currency gained versus the yen to ¥161.4588.

The greenback also strengthened versus the yen, to ¥109.7500.

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