Pound Climbs On US Rate Cut, Equities

The pound is reversing last week's unprecedented 20 cent decline against the dollar this week, so far posting a 12 cent increase. At 8.20am GMT the pound stood at $1.6568 from $1.6373 late yesterday, when it posted its biggest two-day gain in more than 23 years. With the FTSE-100 index rising 8.1% yesterday also provides some support for sterling.

The dollar fell as the Fed cut US interest rates to just 1%, a massive 3.5% lower than current UK base-rate. Although a further BoE cut next week following this month's half percent reduction seems highly likely, there is still a wide disparity between rates either side of the pond. Indeed, the Fed have indicated that it may still be prepared to take rates even lower if necessary to kick-start the market.

But it's not all sunshine & roses for the pound. U.K. house prices fell by the most in at least 17 years in October as banks tightened credit and the prospect of a recession deterred potential buyers, Nationwide Building Society said. The average cost of a home fell 14.6 percent from a year earlier, the largest decline since the survey started in 1991, the mortgage lender said today.