Sterling falls vs dollar

By Alastair Sharp

LONDON (Reuters) - Sterling fell to eight-week low against a broadly stronger dollar on Thursday but held steady against the euro after the Bank of England and European Central Bank kept rates on hold as expected.

The dollar gained broadly after home sales data for June came in better than expected, allaying fears on the extent of the economic slowdown in the U.S.

By contrast, the property market is showing more signs of strain, with house prices falling in July to their lowest in two years, according to data released on Thursday from Halifax, the biggest mortgage lender.

Evidence of a slowing economy is preventing the Bank of England from raising rates despite rising prices and the central bank held rates steady at 5.0 percent as widely expected.

"Signalling a neutral bias is the best the Bank can offer the ailing economy for now amid the current significant overshoot of headline inflation," said Matthew Sharratt, an economist at Bank of America.

He added that slowing growth would likely contain inflationary pressure in the medium-term.

A Reuters poll had showed all 76 economists questioned thought the Bank would hold rates at 5.0 percent but 29 thought the central bank would cut rates by year-end.

The Halifax house price index showed house prices falling 1.7 percent in July, further than forecast, bringing the yearly fall to 8.8 percent while U.S. pending home sales unexpectedly rose in June.  Continued...