LONDON (Thomson Financial) - The pound hit the 2 dollar mark again for the first time this year after the Bank of England announced it was leaving interest rates unchanged, while the euro remained above the 1.53 usd mark ahead of this afternoon's press conference by European Central Bank president Jean-Claude Trichet.
The BoE's decision came as no surprise. Although a further cut is expected, most do not see any change until May, given ongoing evidence of rising inflationary pressure.
'Current elevated inflation risks meant that it was too soon for the Bank of England to be comfortable about cutting interest rates again despite serious concerns about the growth outlook,' said Howard Archer at Global Insight.
The pound gained after the decision, benefiting from broad dollar weakness and from the fact that there had been some fears of a surprise rate cut. The UK currency hit a high of 2.0031 usd, its highest level so far this year.
Meanwhile, the euro hit a string of all-time highs against the dollar this morning on the back of a combination of weak US data yesterday, earlier reports of an explosion in Times Square, New York, and ahead of this afternoon's press conference by European Central Bank president Jean-Claude Trichet.
The ECB left interest rates on hold at 4.00 pct as expected, with all eyes now turning to Trichet's press conference at 1.30 pm GMT, where he is likely to maintain his hawkish stance.
In contrast to the US, ongoing worries about rising inflationary pressures are likely to continue to outweigh growth concerns, preventing the central bank from cutting interest rates and keeping the euro well supported.
The euro earlier hit a new all-time high against the dollar of 1.5347, as well as a new record high against the pound of 0.7692 stg.
The currency's surge has sparked jaw-boning from a number of euro zone politicians but most in the market feel that the chances of the ECB intervening to weaken the euro are slim.
The dollar meanwhile continues to take a battering, particularly against perceived safe haven currencies such as the Swiss franc as well as the euro and the yen, amid high levels of risk aversion.
Yesterday's ADP data showing that private sector US firms cut 23,000 jobs during February only exacerbated concerns over the outlook for the US economy, suggesting the Federal Reserve will continue to cut interest rates.
Tomorrow's key US non-farm payrolls data will be closely watched and a similarly weak report could spark further losses for the dollar. A further indication of the state of the US jobs market will be seen in today's weekly jobless claims data.
London 1248 GMT London 0849 GMT
US dollar
yen 103.41 down from 103.42
sfr 1.0315 down from 1.0318
cad 0.9845 up from 0.9834
Euro
usd 1.5326 down from 1.5337
stg 0.7651 down from 0.7680
yen 158.50 down from 158.66
sfr 1.5811 down from 1.5823
Sterling
usd 2.0024 up from 1.9971
yen 207.16 up from 206.55
sfr 2.0658 up from 2.0596
Australian dollar
usd 0.9380 up from 0.9359
stg 0.4684 down from 0.4688
yen 97.02 up from 96.81 jessica.mortimer@thomson.com jkm/cmr COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
© 2008 AFX News
