Downbeat U.S. economic data also weigh on greenback
Downbeat U.S. data pushed down the dollar against its major rivals Thursday, while the British pound rose in the wake of the Bank of England's widely expected interest rate cut.
The BOE's Monetary Policy Committee cut interest rates by 50 basis points to 1.5%, an all-time low for the benchmark since the BOE's founding in 1694. Last month, it slashed the key rate a full percentage point to 2%. See full story on BOE's latest move.
Some strategists said the pound's sharp plunge at the end of last year, which temporarily drove sterling to the verge of parity with the euro, likely restrained policy makers somewhat.
In the statement, the central bank twice described sterling's fall as "substantial."
Moreover, the size of Thursday's rate move and the tone of the statement dampened expectations the Bank of England would quickly emulate the Federal Reserve's move toward zero rates in the U.S., observers said.
The BOE "claimed that the pound's significant drop and falling inflation will provide stimulus to the economy," wrote John Rivera, currency analyst at DailyFX. "The comments were somewhat hawkish and left doubts of further easing, which sent the pound up."
But analysts were far from unanimous as to the outlook for future rate reductions.
With economic conditions "not expected to improve, further [BOE] cuts remain likely in the months ahead," said Benjamin Reitzes, analyst at BMO Capital markets.
Against the dollar, the British pound rose as high as $1.5372, compared with $1.5034 in morning trade and with $1.5097 late Wednesday. It was last trading at $1.5216.
The euro was down 0.2% against the pound at 90.04 pence.
The euro rose to $1.3710, from $1.3606 late Wednesday.
Obama, data weigh on dollar
The dollar index , a measure of the greenback against a trade-weighted index of six major currencies, stood at 81.533, down from 82.332 late Wednesday.
The dollar also fell versus the Japanese currency, dipping to 91.09 yen from 92.66 yen Wednesday.
President-elect Barack Obama warned of potential double-digit employment without massive stimulus.
Obama also spoke about unemployment in urging Congress to get to work on a package of new spending and tax cuts, saying the costly plan is need to head off dire consequences for the country. See detailed report.
The dollar was further pressured by a report showing U.S. jobless claims fell in the latest week.
Initial claims for unemployment benefits declined 24,000 to 467,000 in the week ended Jan. 3. Continuing jobless claims, an indication of the difficulty in finding a new job, rose to the highest since November 1982.
