Sterling fell to a record low versus the euro on Monday in thin Christmas Eve trading, as more evidence of a slowing housing market firmed expectations of more Bank interest rate cuts in the new year.

Property consultant Hometrack said on Monday that annual house price inflation in England and Wales fell to its lowest in 1-1/2 years in December -- adding to the picture of a slowing economy potentially in need of a boost from lower rates.

Expectations of a move as soon as January were ignited by news last week that the BoE was unanimous on December's quarter point rate cut to 5.5 percent and even discussed whether slowing economic growth meant a bigger easing might be needed.

"The drip feed of bad news on the UK housing market is the main driver of relative weakness in the pound at the moment," said Steven Pearson, chief currency strategist at Bank of Scotland Treasury.

"There is general pressure on the pound (from) the idea that ... you are going to see policy being eased in the UK and the U.S. but not the euro zone."

By 8:55 a.m. British time, the euro had risen as high as 72.63 pence according to Reuters data - the strongest since its 1999 launch.

In contrast to the BoE, the European Central Bank has stuck to relatively hawkish rhetoric, with President Jean-Claude Trichet saying in an interview published on Monday that the ECB was determined to stop increases in oil and food prices from becoming entrenched in a broader inflation rise.

Versus the dollar sterling was steady at $1.9826, having earlier set a fresh four-month low at $1.9802.

It opened at 98.70 on the BoE's trade-weighted basis - its lowest since April 2006 and down more than five percent since the start of the year.

Source supplied by Reuters