While the British pound recovered somewhat from a steep decline during the European trading session, the release of weaker-than-expected house price data undoubtedly took a toll on sentiment on the currency. UK home prices, as measured by Nationwide Building Society, tumbled 2.5 percent during the month of May – the sharpest decline since record keeping began in 1991 – while prices fell 4.4 percent from a year earlier.
Indeed, tighter lending standards have cooled demand for properties and mortgages, leaving the UK housing sector a major soft spot for the national economy. However, given the fact that recent consumer price growth has proven to be stronger than expected and is only forecasted to accelerate faster in coming months, the Bank of England has very little scope to cut rates from the current level of 5.00 percent. If the reality of this situation takes a hold of the markets, GBP/USD could regain footing to climb toward 2.00.