Sterling slumped lower on Thursday, to its largest one-day fall in nearly a month against the greenback, after the Bank of England cut interest rates and restarted bond purchases in a move aimed at alleviating the impact of Britain's vote to exit the European Union.
The US dollar, meanwhile, was higher against a basket of currencies for a second straight session, as forex investors continued to square their positions ahead of Friday's crucial US nonfarm payrolls report for July.
Apart from cutting rates to a record-low 0.25 percent from 0.5 percent, the BoE launched two new stimulus measures, one to buy 10 billion pounds of high-grade corporate bonds and another – potentially worth up to 100 billion pounds – to ensure banks keep lending even after the rate cut.
Cable slipped around 1.5 percent against the dollar in the first half hour after the decision and as BoE Governor Mark Carney started speaking. GBP/USD closed the session at 1.3105 while EUR/GBP rallied to 0.8496, more than 1.5 percent higher.
The greenback rallied against its major rivals as it drew strength from the gains against the pound. The greenback bounced back from six-week lows hit on the back of sour second quarter GDP figures.
The dollar index gained 0.22 percent to 95.77, holding above a low of 95.003 touched earlier this week.
Ahead of Friday's key US jobs report, fed fund futures have priced in a 12 percent chance the Fed will hike rates at its policy meeting next month, as for the December meeting, there is a 33 percent probability of a hike.
