Pound steady as traders await Bank of England’s announcement By Polya Lesova, MarketWatch LONDON (MarketWatch) — The euro on Thursday edged higher ahead of the European Central Bank’s announcement on monetary policy, while the U.S. dollar was lower against most major rivals as investors’ appetite for risky assets was buoyed by news that European officials plan to take steps to bolster the euro-zone banking sector. The dollar index DXY +0.19% , which tracks the performance of the greenback against a basket of other major currencies, slipped to 78.834 from 78.968. European equity markets and U.S. stock futures rose Thursday, buoyed by reports that European regulators are planning a new round of stress tests for banks. Also, European Commission President Jose Manuel Barroso reportedly said Thursday that the commission is pushing member states to carry out a coordinated recapitalization of the region’s banks. The euro EURUSD -0.31% rose to $1.3377 from $1.3347 in North American trade late Wednesday. The European Central Bank’s governing council is meeting in Berlin Thursday and will release its decision on interest rates at 7:45 a.m. Eastern time. The news conference of ECB President Jean-Claude Trichet will begin at 8:30 a.m. U.S. Eastern and will be Trichet’s last as head of the central bank. Italy’s Mario Draghi will take the helm in November. See more on the ECB meeting. In London, the Bank of England’s monetary policy committee will also make a monetary-policy announcement at 7 a.m. Eastern time. “We expect both banks [ECB amd BOE] to remain on hold today, although we, like consensus, are expecting the ECB to announce long-term funding measures to provide liquidity to the banking sector along with a continuation of its Italian and Spanish bond-buying program,” said Kathleen Brooks, research director at FOREX.com, in a note. While many economists expect the ECB to keep interest rates at 1.5%, some see the possibility of a rate cut on Thursday in response to the sharp slowdown in the euro-zone economy. If the ECB lowered rates, that would be a dramatic reversal of policy after the bank hiked rates twice this year in an attempt to tame rising inflationary pressures. Meanwhile, the Bank of England’s official interest rate is likely to remain at a record low 0.5%, but economists say the bank is increasingly likely to implement another round of quantitative easing, or pump more money into the economy through bond purchases. While more quantitative easing is expected eventually, many economists expect it to be announced at the Bank of England’s November meeting. The British pound GBPUSD -0.93% was little changed at $1.5481 compared to $1.5466 late Wednesday. The pound may fall sharply if the BOE announces more QE on Thursday, analysts note. In other trading, the dollar USDJPY -0.18% bought 76.71 Japanese yen compared with 76.78 yen on Wednesday. Polya Lesova is chief of MarketWatch’s London bureau.

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