Pound Falls Amid Risk Aversion

The British pound weakened against the other major currencies in the early European session on Thursday amid risk aversion, as concerns about the slowing growth of global economy and the global central banks' measures of adopting negative rates to stimulate economic growth dampened the investor mood.

The U.K.'s FTSE 100 index is currently down 2.21 percent or 125.31 points at 5,546, France's CAC 40 index is down 2.69 percent or 109.09 points at 3,952 and Germany's DAX is down 2.38 percent or 214.41 points at 8,802.

Adding to nervousness, Riksbank slashed rate unexpectedly into deeper negative territory, as it expects inflation to remain weaker this year.

The repo rate was cut by 0.15 percentage points to -0.50 percent, from -0.35 percent. Economists had expected to retain rate at -0.35 percent. The bank said there is still scope to cut the repo rate further.

Investors turned cautious ahead of Fed Chair Janet Yellen's second leg of testimony on the economy.

In the Asian session today, the pound held steady against its major rivals.

In the early European trading, the pound dropped to a 2-day low of 1.4397 against the greenback, coming off from its prior high of 1.4564. On the downside, 1.42 is seen as the next support level for the pound.

The pound fell to a 9-month low of 1.3925 against the franc and more than 1-year low of 0.7874 against the euro, from its early highs of 1.4159 and 0.7754,respectively. The pound is likely to find support around 1.38 against the franc and 0.80 against the euro.

The pound weakened to 159.81 versus yen, its lowest since November 2013, off its previous high of 165.04.The pound may test support near the 160.00 region.

Looking ahead, at 6:30 am ET, Bank of England deputy governors Jon Cunliffe and Andrew Bailey will appear at the Lords committee on euro zone financial system in London.

In the New York session, U.S. weekly jobless claims for the week ended February 6 and Canada new housing price index for December are due to be released.

At 10:00 am ET, Federal Reserve Chair Janet Yellen will testify on the Semiannual Monetary Policy Report before the Senate Banking Committee in Washington DC.

Eurozone finance ministers will meet in Brussels later in the day.

The Chinese market continues to remain closed in observance of the week-long Golden Week holidays and the Japanese banks are closed in observance of the National Foundation Day holiday.