Pound pressured by weak housing and confidence data

LONDON (Reuters) - The pound fell to a two-week low against the dollar on Wednesday as the worst consumer confidence and housing data since the 1990s reinforced the gloomy economic picture and boosted prospects of rate cuts.

Consumer confidence sunk to its lowest level since the economic slump of 1992, after sterling was thrown out of the European Exchange Rate Mechanism, according to a GfK survey.

House prices fell for the sixth consecutive month in April and posted the first annual fall in more than 12 years following data on Tuesday that showed mortgage approvals slumped to record lows in March.

The data prompted Prime Minister Gordon Brown to say in a BBC interview that it was his priority to lead Britain through its current difficulties by unlocking the mortgage market to deal with falls in house prices.

"House price data was weaker than expected and overall sentiment is negative and we expect it to be so for some time," said David Pais, currency strategist at Citi.

"Analysts expect the Bank of England to cut rates every three months and this will engender more sterling weakness."

By 8:43 a.m. BST, the pound was down 0.2 percent at $1.9660, having fallen to a two-week low of $1.9626. The euro was up 0.3 percent at 79.27 pence.

Bankl Monetary Policy Committee member David Blanchflower said that house price falls of about a third did not seem an unreasonable proposition and said cutting interest rates could prevent such "a dramatic fall".

However, Blanchflower is seen as an arch dove and Bank Governor Mervyn King was less gloomy on prospects the economy saying on Tuesday that a period of slower economic growth would not be a "disaster" for Britain.