During early European session on Thursday, the pound dropped against other major currencies as investors await the Bank of England’s interest rate announcement. While the pound plummeted to a new multi-month low against the franc and a 16-day low against the euro, it eased from a new multi-month high against the dollar and a new multi-day high against the yen.
The BoE is due to announce its decision at 7:00 am ET. Analysts expect the central bank to keep rates unchanged at 0.5%.
The pound fell despite a rise in stocks. Most Asian and European stocks soared today, taking cues from Wall Street, where stocks soared sharply overnight on a better than expected retail sales report.
Traders were also encouraged by an upbeat Australian jobs data. In addition, the International Monetary Fund has raised its 2010 growth estimate for the global economy reflecting stronger activity during the first half of the year.
The world economy is now forecast to expand 4.6% by the lender, faster than the 4.2% increase projected in April. If achieved, this would represent the fastest rate of global growth since 2007. Growth in 2011 is seen at 4.3%, which is unchanged from the previous estimate.
U.K.’s benchmark FTSE 100 index is currently trading at 5,077.55 – up 62.46 points or 1.24% over its previous close.
Dismal U.K. house price report from the Halifax released today exerted selling pressure on the pound. The lender said prices fell another 0.6% last month, following a 0.5% monthly decline in May. This was in contrast to analyst expectations for a 0.2% increase. Halifax said this took the average house price down to GBP 166,203.
Although a better than expected industrial production report from the U.K. released at 4:30 am ET strengthened the pound, it pared gains shortly.
U.K. industrial production recorded a monthly growth of 0.7% in May, reversing a revised fall of 0.7% in April, data from Office for National Statistics showed. The expected increase was only 0.4%.
Meanwhile, annual growth in industrial production increased to 2.6% from April’s 1%. The latest growth figure was smaller than the expected 3.1% rise.
The pound weakened against the Swiss franc after reaching a high of 1.6043 at 3:20 am ET Thursday. As of now, the pound-franc pair is trading at a new multi-month low of 1.5936, compared to 1.5988 hit late New York Wednesday. On the downside, 1.581 is seen as the next target level for the U.K. currency.
Switzerland’s seasonally adjusted jobless rate dropped to 3.9% in June from 4% recorded in May, data released by the State Secretariat for Economic Affairs showed today. That was in line with economists’ expectations. There were 155,318 unemployed in June.
The pound rose to 0.8313 against the euro before losing ground at 2:25 am ET Thursday. The euro-pound pair that closed yesterday’s trading at 0.8321 is currently worth 0.8360. This set a 16-day low for the pound. If the pound slides further, it may likely target the 0.839 level.
German trade balance for May and the Bank of France business sentiment index for June, which were released today likely influenced the euro.
The pound that climbed to a new multi-month high of 1.5243 against the dollar and a new multi-day high of 134.64 against the yen at 2:25 am ET Thursday slipped thereafter. At present, the pound is worth 1.5160 against the dollar and 133.70 against the yen. The next downside target level for the pound is seen at 131.3 against the yen and 1.509 against the dollar. The pound-yen and the pound-dollar pairs were worth 133.27 and 1.5193, respectively at yesterday’s close.
Traders are now likely to focus on the German industrial production report for May, which is due at 6:00 am ET.
The European Central Bank is scheduled to announce its decision on interest rates at 7:45 am ET. The ECB is widely expected to keep rates steady at 1%.
ECB President Jean-Claude Trichet will hold his regular press conference at 8:30 am ET.
At the same time, the U.S. weekly jobless claims report for the week ended July 03 is expected..
The U.S. consumer credit report for May has been slated for release at 3:00 pm ET.