British Pound Sterling
British Pound SterlingReuters

The British pound has fallen against the US dollar despite better than expected housing market data as the dollar rallied on a strong ISM data overnight, even as markets awaited the UK industrial output data and NIESR GDP estimate due later in the day.

The GBP/USD dropped to 1.6858 from Tuesday's close of 1.6886, and it is not far away from 1.6813, the seven-month low touched on 1 August.

Sterling is the second worst performer on Wednesday after the New Zealand dollar which has fallen to multi-month lows versus majors after the Q2 employment data.

Data on Tuesday showed that the US ISM non-manufacturing index had risen to 58.7 in July, its highest since March 2011. It compares with 56.0 in the previous month and street expectations of 56.3.

The greenback rallied across the board on the data. The USD index, the gauge that measures the greenback's strength against a basket of currencies on a trade-weighted basis, rose to an eleven-month high of 81.65.

The ISM-triggered dollar rally prevented the Halifax data that showed the UK's house prices had risen more than expected in the June quarter from helping the pound trade higher.

Halifax said house prices rose 10.2% from a year earlier in the three-months to June, higher than 8.8% in May and a consensus estimate of 9.6%.

The market is now waiting for the June industrial output data, due at 8:00 GMT and the NIESR GDP estimate for the three months to July, scheduled at 14:00 GMT.

Industrial output is forecast to have grown 1.5% from a year earlier in June, slower than the 2.3% rise in May, and manufacturing growth is expected at 2.1% from 3.7% in the previous month.