LONDON (MarketWatch) -- The dollar traded lower against the British pound and the euro Thursday, as the Bank of England and the European Central Bank prepared to announce their latest monetary-policy decisions.
Both central banks are widely expected to leave official interest rates unchanged, with attention is focused on Jean-Claude Trichet, president of the European Central Bank. During his monthly news conference at 8:30 a.m. Eastern, he's expected to reveal details of a 60-billion-euro plan to purchase covered bonds. See full story.
$DXY 79.34, -0.16, -0.21%
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The dollar index (DXY 79.34, -0.16, -0.21%) , which measures the performance of the greenback against a basket of currencies, stood at 79.161, down from 79.499 in late North American trading Wednesday.
The euro rose to $1.4202, up from $1.4143. The pound gained 0.7% on the day to $1.6408.
The Bank of England will announce the decision of its Monetary Policy Committee at 7 a.m. Eastern. The Frankfurt-based European Central Bank's policy decision will be announced at 7:45 a.m.
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Strategists at Lloyds TSB said updated staff projections from the European Central Bank could trigger a "knee-jerk reaction" in currency markets.
The central bank's staff is expected to further lower its 2009 economic-growth forecast to show a full-year contraction of just less than 4%, while inflation forecasts are likely to show little change, said economists at Danske Bank.
The staff's March projection was for a 2.7% annual contraction, and pegged inflation at 0.4% for 2009, well below the ECB's annual target of near but just below 2%.
Also, European unease over the euro's recent rise above the $1.40 mark the dollar could be enough to prompt Trichet to shake his usual reluctance to comment on foreign-exchange rates, the Lloyds strategists said.
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Meanwhile, data compiled by mortgage lender Halifax showed British house prices posted an unexpected 2.6% monthly increase in May.
The average U.K. house price rose to 158,565 pounds ($259,823). That's 16.3% below the level seen in May 2008.
Economists had forecast a 0.6% monthly fall and a 17.2% annual decline.
Against the Japanese currency, the dollar rose to 96.53 yen, up from 95.87 yen late Wednesday.
Economists at Brown Brothers Harriman said the yen was pressured after data showed first-quarter Japanese capital spending posted the largest drop in 54 years and the government said Japanese investors bought nearly a trillion yen more foreign bonds than they sold last week.
Capital spending fell 25.3% in the January-March period from the year-earlier quarter, Ministry of Finance data showed. Recurring profits dropped 69%.
