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Pound powers past weaker dollar Pound powers past weaker dollar
(about 6 hours later)
The pound's recent run of strength against the US dollar has continued, with sterling again rising to its highest levels since 1981. The pound strengthened its position against the US dollar, with sterling again rising to its highest levels since 1981.
Gains were fuelled by speculation that the Federal Reserve will trim US interest rates for a second time in two months later on Wednesday. The gains were fuelled by the Federal Reserve's decision to trim US interest rates for a second time in two months.
The pound hit a 26-year high of $2.0743 before pulling back to $2.0719 after US economic figures beat market forecasts. The pound rose to a 26-year high of $2.08 after rising earlier in anticipation of the move, which had been widely expected.
Analysts said they still expected a rate cut despite the good data. The Fed cut rates from 4.75% to 4.5% even after good US economic data.
"Dealers are showing no hesitation in selling the dollar against the euro as they think the Fed is likely to go for more rate cuts, even after the one expected today," said Tsutomu Soma, senior manager of foreign securities at Okasan Securities.
Niels Christensen, FX strategist at Nordea in Copenhagen, added: "Everybody is looking for a US rate cut this evening and selling the dollar across the board."
The euro has also been gaining against the US currency, and touched $1.4467, the fourth-highest level in its history.The euro has also been gaining against the US currency, and touched $1.4467, the fourth-highest level in its history.
Economic woesEconomic woes
The US has been beset by problems in the housing market, making a rate cut more likely as the Fed tries to stimulate the market and economy. The US has been beset by problems in the housing market, adding to a largely consensus view that a rate cut was very likely as the Fed tries to stimulate the market and economy.
By contrast, the UK market has been much more robust and a report on Wednesday showed that prices rose sharply in October.By contrast, the UK market has been much more robust and a report on Wednesday showed that prices rose sharply in October.
That made it even more likely that the Bank of England would keep UK rates on hold at 5.75% at its meeting next week, analysts said.That made it even more likely that the Bank of England would keep UK rates on hold at 5.75% at its meeting next week, analysts said.
Dealers are showing no hesitation in selling the dollar against the euro Tsutomu Soma, Okasan Securities.Dealers are showing no hesitation in selling the dollar against the euro Tsutomu Soma, Okasan Securities.
Taken together with the expectation that the Fed will cut US rates later on Wednesday from the current 4.75%, this makes the pound more lucrative than the dollar for investors. Taken together with a cut in US rates from 4.75% to 4.5%, this makes the pound more lucrative than the dollar for investors.
The Fed is under pressure to reduce US interest rates further to help boost the struggling housing market, amid growing signs of weakness in the wider economy.The Fed is under pressure to reduce US interest rates further to help boost the struggling housing market, amid growing signs of weakness in the wider economy.
A key report showed on Tuesday that US consumer confidence declined for the third month in a row in October to its lowest level in two years.A key report showed on Tuesday that US consumer confidence declined for the third month in a row in October to its lowest level in two years.
The Fed cut its benchmark interest rate to 4.75% from 5.25% in September.The Fed cut its benchmark interest rate to 4.75% from 5.25% in September.
The latest UK house price data came from mortgage lender Nationwide.The latest UK house price data came from mortgage lender Nationwide.
It found that house prices rose at an annual rate of 9.7% in October, up from September's 9% gain.It found that house prices rose at an annual rate of 9.7% in October, up from September's 9% gain.
The pound still has some way to go before it beats the $2.40 highs seen in 1980 and 1981.The pound still has some way to go before it beats the $2.40 highs seen in 1980 and 1981.