Sterling gets a risk-on lift, brushes off real estate decline

FILE PHOTO: Illustration shows British Pound banknotes

LONDON (Reuters) - Sterling rose on Thursday, thanks to a pickup in investor risk appetite that knocked the dollar and to hawkish comments from Bank of England officials, even after evidence of further deterioration in the British housing market.

At 1050 GMT, the pound was up 0.58% to $1.21440 and was 0.08% higher against the euro, trading at 88.680 pence.

A survey on Thursday showed Britain's housing market suffered the most widespread price falls since 2009 last month as the run of interest rate increases over the past year weighed on would-be buyers.

"There seemed to be few UK specific factors pushing GBP higher early this morning. The RICS house price data were weak," Mizuho senior economist Colin Asher said.

Homebuilders Bellway and Redrow on Thursday also flagged persistent challenges in the UK property market, as consumers grapple with a cost-of-living crisis.

But the pound rose against the dollar, as positive sentiment permeated markets on Thursday. Equities rallied, with the pan-European STOXX 600 index touching a one-year high as investors pinned hopes on peaking inflation and fears of a major recession abated.

"GBP is enjoying the positive risk appetite, rather than being driven higher by UK-specific factors. The new high for the FTSE has likely attracted some interest from overseas buyers," said Asher.

Britain's blue-chip FTSE 100 index hovered around record highs on Thursday.

Traders paid heed to comments delivered by several Bank of England officials, including those from Jonathan Haskel who said he still saw a role for "forceful action" if inflation stays persistent, language largely dropped by the Monetary Policy Committee last week.

"The commentary from the BoE members at the TSC looks to be mildly hawkish and may provide a little more upward momentum," said Mizuho's Asher.

The BoE has hiked interest rates 10 times since December 2021, the last being a week ago, as it battles to bring down sky-high inflation without causing a deep recession.

On Friday, the UK's Office for National Statistics will publish estimate GDP figures for December 2022.

"With so much buildup and with GBP in such a stasis with USD and EUR, whatever the figure prints it will have a significant effect on Sterling which is clinging to 1.20 against the dollar," David Stritch, a currency analyst at broker CaxtonFX, said in a note.

(Reporting by Lucy Raitano; Editing by Emelia Sithole-Matarise)