Sterling falls vs dollar on BoE's Sentance, housing data

By Michael Taylor

LONDON, June 23 (Reuters) - Sterling fell to session lows against the dollar on Monday after a Bank of England policymaker indicated that interest rates might not have to go up as much or as quickly to cool inflationary pressures as many expect. Writing in the Daily Mail, BoE Monetary Policy Committee member Andrew Sentance said current headline inflation is "temporary" and said a weak economy and housing market should help offset rising prices over the next year.

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Sentance echoed comments from British Finance Minister Alistair Darling on Sunday that pay awards be kept in check to ensure they did not add to inflationary pressure in the UK economy. [ID:nL22609634]

Also weighing on sterling sentiment on Monday after last week's surprisingly strong retail numbers, property website Rightmove said that average asking prices fell 1.2 percent this month after a 1.2 percent gain in May. [ID:nL20586684]

"There is a huge underlying concern that higher inflation expectations are going to feed into higher wage claims and there is further evidence of this in the comments," said Russell Jones, head of fixed income and currencies global research at RBC.

"The response of the market is telling you that the BoE has got a big credibility problem, and on top of that you've got further evidence of a weak housing market overnight." By 0800 GMT, the pound was around 0.5 percent lower against a firmer dollar at $1.9672 GBP=.

The euro was flat on the day at 79.00 pence EURGBP=, recovering from a slide to a near two-week low last week.

Last week, official data showed inflation reached its highest level in Britain in 11 years.