Dollar Rockets Higher Versus Other Majors After BOE Cuts, ECB Holds Steady [EUR/USD]

Dollar Rockets Higher Versus Other Majors After BOE Cuts, ECB Holds Steady [EUR/USD]

Thursday, February 07, 2008 3:01:40 PM - The dollar gained ground against other major currencies on Thursday after the Bank of England cut interest rates and as the European Central Bank left its key rate unchanged.The European Central Bank kept its key lending rate at a six-year high of 4 percent Thursday morning, as expected. In his press conference accompanying the rate decision, ECB President Jean-Claude Trichet said the decision was unanimous and reflected concerns about the upside risk for inflation.However, Trichet may have softened his hawkish tone in conceding that incoming data has confirmed the risks for Euro zone economic activity are to the downside.The Bank of England cut its key lending rate by a quarter point to 5.25 percent. The central bank said its Monetary Policy Committee judged that a 25 basis point cut was necessary to meet the 2 percent target for CPI inflation in the medium term.Traders also considered data showing pending home sales fell more than economists had been expecting in the month of December.The National Association of Realtors said its pending home sales index fell 1.5 percent to a reading of 85.9 in December from a downwardly revised reading of 87.2 in November. Economists had been expecting a more modest decrease of about 1.0 percent.The Department of Labor released its report on US initial jobless claims in the week ended February 2, showing that jobless claims fell by less than economists had been expecting compared to a two year high in the previous week. The dollar soared to a fresh 2-week high versus the euro, climbing more than 2 cents to 1.4438 by mid-afternoon. The dollar extended its week-long uptrend against the euro and moved away from November's record low of 1.4947, last challenged a week ago.The greenback also gained significant ground against the sterling, jumping 2 cents to a 2 1/2 week high of 1.9386. The dollar has been trending higher versus the sterling of late on speculation the Bank of England will further lower interest rates.Versus the yen, the dollar raced higher in afternoon dealing, reaching a 2-week peak of 107.82 before paring its gains to fetch 107.35 approaching 3 pm ET.