By Shawn Langlois and Carla Mozee, MarketWatch
LONDON (MarketWatch) — The Bank of England on Thursday signaled that it won’t be raising interest rates anytime soon, lifting the FTSE 100 and putting big pressure on the British pound in the process.
The bank, with newly-installed Governor Mark Carney at the helm, said the recovery is on track but it “remains weak by historical standards and a degree of slack is expected to persist for some time.” The British pound GBPUSD -1.31% fell 1.2%.
The Bank of England decided to keep its key lending rate at a record low 0.5% and to leave the size of its bond-buying program unchanged at 375 billion pounds ($572 billion).
Separately, the U.S. dollar edged higher against the euro Thursday following a flare-up in the euro-zone’s financial crisis and as the European Central Bank held interest rates steady.
The euro EURUSD -0.80% fetched $1.2991, compared with $1.3003 late Wednesday in North America.
The European Central Bank kept its main refinancing rate at 0.5%, and the spotlight is set to fall later in the day on ECB President Mario Draghi’s press conference following the meeting. The market will also monitor developments in Egypt following the military ouster of President Mohammed Morsi Wednesday.
Draghi may field questions about Portugal, where political turmoil over the country’s austerity plans spurred a spike in its borrowing costs Wednesday and concerns that the country may need another bailout.
The euro also lost ground against the Japanese yen Thursday, EURJPY -0.72% , buying ¥129.63 compared with ¥129.90. The euro on Wednesday marked its first loss against the yen in five sessions.
Draghi is expected by analysts to offer “dovish” comments at Thursday’s press conference, emphasizing downside risks to the region’s recession. It will be the first ECB meeting since U.S. Federal Reserve Chairman Ben Bernanke said the Fed may slow the pace of its own monetary stimulus by as early as this year. That projection helped trigger a rise in government bond yields worldwide.
“Thus far, the U.S. dollar offers the only real safety amid higher U.S. and euro-zone yields, the latter fueled by risk aversion on bad news from the region,” wrote Popplewell.
Against the Japanese yen, the U.S dollar USDJPY +0.08% traded at ¥99.80 versus ¥99.89 on Wednesday, when the greenback slipped back below the ¥100 level.
The ICE dollar index DXY +0.68% , which measures the U.S. unit against six other major currencies, was still able to rise, to 83.291 from 83.249 on Wednesday. The WSJ Dollar Index XX:BUXX +0.51% , a rival gauge with a slightly wider comparison basket, rose to 75.20 from 75.18.
The next scheduled event facing the currency market is the release of U.S. jobs data for June on Friday. The economy may have created 155,000 net jobs last month, less than the 175,000 gain in May, according to analysts polled by MarketWatch.
The Australian dollar AUDUSD +0.53% traded at 91.09 U.S. cents, more than 90.62 U.S. cents. The Aussie on Wednesday fell to its lowest level against the U.S. unit since September 2010 on the suggestion that further interest-rate cuts were possible.
Shawn Langlois is an editor and columnist for MarketWatch in London. Follow him on Twitter @slangwise.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
