The UK's sterling pared its Asian session gains against its major counterparts after the Central Banks of England and the Europe cut rates to record low levels. The pound thus fell from multi-day highs against other major currencies.
The Bank of England decided to reduce the key interest rate by 50 basis points and announced a GBP 75 billion Asset Purchase Program. At the end of two-day rate setting meeting, the Monetary Policy Committee of the Bank of England slashed the key interest rate to 0.5% as expected. The interest rate now stands at the lowest level since the central bank was established in 1694.
The Bank also noted that a very low level of Bank Rate could have counter-productive effects on the operation of some financial markets and on the lending capacity of the banking system. The Committee judged that the latest reduction in Bank Rate would by itself still leave a substantial risk of undershooting the 2% CPI inflation target in the medium term.
As widely expected, the Governing Council of the European Central Bank cut its benchmark interest rate by 50 basis points to a record low of 1.5 percent. This was the lowest level since the Bank started setting euro rates in January 1999. ECB President Jean-Claude Trichet is expected to hold his regular post-decision press conference at 8.30 AM ET.
The pound halted its early morning rally against the euro in early trading, easing to 0.8942 by 7:05 am ET. The pound thus dropped from a 3-day high of 0.8863 hit around 4:15 am. The euro-pound pair that was worth 0.8922 at Wednesday's close is currently trading at 0.8915.
In economic news from the euro area, the record contraction in Euro-zone economy in the final three months of 2008 was confirmed today. Euro-zone economy contracted 1.5% in the final quarter of 2008, compared with the previous quarter. This follows a 0.2% fall in gross domestic product in the third quarter.
At the same time, a report by the German Federal Statistical Office stated that retail sales in real terms decreased 1.3% year-over-year in January, in contrast to a revised 0.4% increase in the previous month. Economists' were looking for a decrease of 0.7%. A year ago, retail sales were up 1.8%.
Against the greenback, the pound fell to 1.4041 in early trading from a 3-day high of 1.4235 hit by 3:30 am Eastern Time. The cable that closed yesterday's deals at 1.4197 is currently trading at 1.4111.
Traders await reports from the U.S. Department of Labor on the fourth quarter non-farm productivity and the weekly jobless claims that are due out shortly.
The pound that climbed to a weekly high of 141.55 against the yen early in the European session lost some ground thereafter. The pound slipped to 139.11 against the yen before edging slightly higher in early New York deals. The pound-yen pair, which closed Wednesday's deals at 140.78, is currently trading at 140.08.
The yen was under pressure in the morning as a government report showed today that the fourth quarter business investment in Japan decreased by 17.3 percent from the same period a year ago. The decline was the largest on record, and marked the seventh straight quarter of lower Capital Expenditure. Capital expending excluding software declined 18.1 percent, also the seventh straight decline.
The pound slipped to 1.6518 against the Swiss franc by 7:20 am Eastern Time, down from a 3-day high of 1.6691 hit around 3:30 am. The pound-franc pair that closed yesterday's deals at 1.658 is currently trading near 1.6585.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.