MW: Pound and euro fall on central-bank announcements
By William L. Watts & Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- The euro and the British pound fell versus the U.S. dollar on Thursday after both the Bank of England and the European Central Bank kept interest rates unchanged.
The British currency dropped after the BoE boosted its quantitative-easing program by an unexpectedly large 50 billion pounds ($84 billion) Thursday, signaling that worries about the fragility of the economic outlook continue to dominate the monetary-policy-making process. See more on Bank of England meeting.
Policy makers "surprised the market by extending its asset-purchase plan' by that much and for three months, said analysts at Brown Brothers Harriman. "This drove sterling sharply lower."
The BOE also left its key rate unchanged at 0.5%.
The British pound fell to $1.6868, from $1.6968 before the announcement and from $1.7020 in late North American trading on Wednesday.
Also Thursday, the European Central Bank left its key lending rate unchanged at a historic low of 1%, as expected. ECB President Jean-Claude Trichet's monthly news conference is scheduled to begin at 8:30 a.m. Eastern.
The euro bought $1.4373, down from $1.4432 Wednesday.
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Many analysts had pointed to signs that the British economy could pull out of recession by year's end to justify expectations that the central bank would put its 125-billion-pound ($211 billion) asset-purchase program on hold See previous story on Bank of England.
The dollar index (DXY 77.85, +0.33, +0.43%) , which tracks the U.S. unit against a trade-weighted basket of six major currencies, rose to 77.881, from 77.515 late Wednesday.
One dollar bought 95.61 Japanese yen, up from 94.99 yen late Wednesday.
Looking further ahead, investors were awaiting the U.S. government's monthly report on nonfarm payrolls for July, due out Friday. Economists surveyed by MarketWatch expect a loss of 275,000 jobs, which would be the fewest jobs lost since August.
"Investors should stay cautious" ahead of Friday's U.S. non-farm payrolls report for July, wrote strategists at UniCredit MIB in Milan.
