Ahead of the interest rate decision by the European Central Bank, the euro declined to a new multi-week low against the British pound. The European Central Bank is widely expected to slash interest rates in the eurozone to a fresh record low of 1%. On the other hand, the euro climbed to a 6-day high against its U.S., Swiss and Japanese counterparts.

Markets have largely priced the ECB to cut its rate by 50 basis points to 1%, hoping to draw funding into banks, and trimming its overnight deposit rate by 25 points to just 0.25 percent. A 50bp cut would leave interest rates 325 basis points below where they were when the ECB started its rate cutting cycle in October.

Even at a record low, the ECB's rate still stand above the 0.5% set by the Bank of England and the near-zero rate from the U.S. Federal Reserve.

In addition to rate cut, analysts expect the ECB may introduce new tools to ease credit strains as traditional measures have reached their limits.

Last month, the European Central Bank cut its key interest rate to the lowest level in the institution's 10-year history as the 16-nation bloc slides deeper into recession.

In a meeting held in Frankfurt, the Governing Council lowered the key interest rate by half a percent to a record low of 1.5%. The ECB also reduced its interest rate on marginal lending facility to 2.50% and the deposit facility to 0.50%.

Gloomy economic reports from the Euro-zone, which were released this week increased speculation of a rate cut. Unemployment in the euro zone jumped more than expected in February to 8.5 percent, data showed yesterday.

Joblessness in the 16 countries using the euro rose from January's upwardly revised 8.3 percent of the workforce, Eurostat, the European Union's statistics office, said. Economists had expected a level of 8.3 percent for February.

The Organization for Economic Cooperation and Development projects Eurozone's GDP to drop 4.1% in 2009 and by 0.3% next year. Weak export markets, falling investment and a continuing credit crunch will hit Euro area activity hard over the coming six months, it said.

Inflation in the euro-zone is expected to be below the medium-term target of 2 percent, European Central Bank Governing Council member Athanasios Orphanides said today.

The ECB has been resistant to taking extraordinary measures something that the Bank of England, the US Fed Reserve and the Bank of Japan have all employed.

As traditional measures reach their limit, ECB policy makers have indicated they may offer banks longer-term loans to ease credit strains. Now the debate is shifting to asset purchases. While Vice President Lucas Papademos says the ECB could buy corporate debt, council members Juergen Stark and Axel Weber have signaled they are opposed to such a move, suggesting the 22- member Governing Council is split on the scope of new measures.

In March, the Bank of England had announced a GBP 75 billion-asset purchase scheme to kick-start the UK economy that is slipping deeper into recession, while the interest rates are at record low.

The French statistical office INSEE said today that the producer price index, or PPI, declined 0.6% month-on-month in February following a 2% fall in January. Producer prices dropped quicker than the expected fall of 0.4%. On an annual basis, the PPI fell 4.5%, sharper than a 2.7% decline recorded in January and a 3.4% drop economists forecast.

The single currency that closed Wednesday's North American session at 0.9159 against the British pound edged down to 0.9087 at 5:50 am ET Thursday. This set the lowest point for the pair since March 09. The next downside target level for the euro-pound pair is seen around 0.898.

The pound made strong gains against its major counterparts today as the U.K. house prices posted a surprise increase in March for the first time since October 2007.

A monthly report from the Nationwide Building Society showed that U.K. house prices rose 0.9% on a monthly basis in March, reversing the 1.9% fall in February. The data surprised economists who had forecast a 1.5% decrease for March.

The euro-pound pair climbed to a 7-week high of 0.9499 on March 18. Dismal economic indicators coming out of Europe dragged the pair from a 7-week high.

The 16-nation currency edged higher to a 6-day high of 1.5265 against the Swiss franc during Thursday's early deals. On the upside, 1.536 is seen as the next target level for the pair. The euro-franc pair closed Wednesday's New York deals at 1.5178.

Swiss National Bank's Vice President Philipp Hildebrand said today that the central bank will continue to take all measures to prevent further strengthening of the Swiss franc and reduce deflationary pressures.

The SNB estimates inflation to remain close to zero in 2010 and 2011. Given the severe recession of the Swiss economy and virtually zero interest rate, the central bank's foreign-exchange interventions are a complementary emergency instrument to combat the threat of deflation.

Against the US dollar, the European currency climbed to a 6-day high of 1.3354 during early deals on Thursday. This may be compared to Wednesday's closing value of 1.3250. If the pair gains further, 1.373 is seen as the next target level.

Against the Japanese yen, the euro rose to a 6-day high of 133.21 during today's deals, compared to 130.56 hit late New York Wednesday. If the pair strengthens further, 134.8 is seen as the next target level.

The dollar and the yen fell today against higher-yielding currencies as stock markets rose on hopes a deep recession is moderating.

In economic news from Japan, the monetary base in Japan was up 6.9 percent on year in March, the Bank of Japan said on Thursday, standing at 94.46 trillion yen. That's up from 93.65 trillion yen in February, which saw a 6.4 percent annual increase.

Leaders of the G20 nations meet today amid signs that the world economy is stabilizing after months of freefall.

U.S. President Barack Obama, U.K. Prime Minister Gordon Brown and their G-20 counterparts, who are responsible for 85 percent of the world economy, are gathering to push along an agenda aimed at ending the slump and avoiding a repeat of the financial crisis.

World leaders would pledge to regulate major hedge funds and establish a new oversight board to monitor the global financial system, reports said citing a draft of the G20 communique. The leaders would vow to cooperate over economic policies to restore global growth and refrain from competitive devaluation of their currencies.

Turning to the US, the Labor Department is due to release its customary jobless claims report for the week ended March 27th at 8:30 am ET.

The Commerce Department is due to release its report on factory goods orders for February at 10 am ET. Orders for manufactured goods are likely to have decreased 0.3% in the month.

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