MW: Pound and euro fall on central-bank announcements
Pound hit as Bank of England surprises markets with further boost of liquidity
By MarketWatch
NEW YORK (MarketWatch) -- The euro and the British pound fell versus the U.S. dollar on Thursday after the Bank of England and the European Central Bank kept interest rates unchanged.
The dollar, which has served as a safe-haven currency, also benefited from hesitations ahead of the key U.S. July jobs report on Friday.
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.
The dollar index (DXY 78.04, -0.03, -0.04%) , which tracks the U.S. unit against a trade-weighted basket of six major currencies, rose to 78.020, from 77.515 late Wednesday.
One dollar bought 95.59 Japanese yen, up from 94.99 yen late Wednesday.
"This universal demand for the greenback suggests that the dollar's rally is fueled less by risk aversion and more by a reduction of short dollar exposure ahead of the [U.S. jobs report Friday]," said Kathy Lien, director of currency research at Global Forex Trading.
The dollar has tended to rise on safe-haven flows, trading inversely to stocks and commodities. On Wall Street, the Dow Jones Industrial Average (INDU 9,256, -24.71, -0.27%) fell 24 points.
Investors awaited 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.
"We tend to see profit taking and hesitation the day before the notoriously volatile economic release as currency traders wait for the outcome before deciding what to do next," Lien said. "The degree of job losses will determine whether the dollar continues to fall and the recovery trade moves ahead or give overly optimistic traders a reality check."
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 said that the pace of the euro-zone's economic contraction is clearly slowing, but data and business surveys indicate activity over the rest of the year is likely to remain weak.
The euro bought $1.4342, down from $1.4432 Wednesday.
