Pound hits record low vs euro

An employee is seen walking over a mosaic of pound sterling symbols set in the floor of the front hall of the Bank of England, in London in this March 25, 2008 file photograph.

LONDON (Reuters) - Sterling hit a record low against the euro on Tuesday, dragged lower after a fall in a key house price index to a 30-year low suggested that the downturn in Britain's housing market is quickening.

The pound was also stung by a fall in retail sales and a surprisingly steady reading of consumer prices.

It hit a near two-month low versus the dollar on a climb in U.S. producer prices and an improvement in regional manufacturing.

The euro climbed more than half a percent to an all-time high of 80.65 pence after the Royal Institute of Chartered Surveyors said that its net balance of British house prices deteriorated to -78.5 in the three months to March from -65.7 in February.

This was the lowest reading since the survey began in January 1978 and such a tumble prompted more worries that the housing market is continuing to suffer, which many in the market believe will take a significant toll on the broader economy.

"This is a clear signal that things in the housing market are getting worse," said Ian Stannard, senior foreign exchange strategist at BNP Paribas.

"The mid-term trend in sterling is to remain lower."

Along with data showing that British like-for-like retail sales fell in March, the RICS data suggested weakness in the British economy may call for more monetary easing from the Bank of England, particularly in light of figures showing that British consumer prices unexpectedly held steady in March.

Sterling was hammered across the board, sliding more than 0.8 percent to $1.9619, its lowest since late February, after U.S. PPI rose 1.1 percent in March from the previous month, suggesting that lingering price risks may prevent more aggressive interest rate cuts from the Federal Reserve.

On a trade-weighted basis, the UK currency slipped to an 11-year low of 91.6.

The CPI figures suggested that UK inflation may be calming, raising expectations that the BoE may keep lowering rates after cutting them by 25 basis points to 5 percent last week.

"Better behaved inflation would provide the Bank of England a freer hand to ease monetary policy in order to cushion the economic slowdown," Bank of America said in a research note.

Analysts at Barclays Capital said they saw a 50-50 chance that the BoE will cut rates by 25 basis points next month, with a 100 percent chance of a cut in June.

(Reporting by Naomi Tajitsu; Editing by David Christian-Edwards)