* Euro tumbles after ECB's rate cut
* BoE slashes rates by 150 bps, sterling slides
* Investors look for bigger rate cuts to boost growth
* Market braces for expected news of big U.S. job losses
(Updates prices, adds comment, changes byline)
By Steven C. Johnson
NEW YORK, Nov 6 (Reuters) - The euro fell broadly on
Thursday after the European Central Bank cut interest rates by
half a percentage point, disappointing investors who thought
sluggish economic growth called for a more aggressive move.
The ECB's decision to reduce borrowing costs to 3.25
percent was a relatively small step compared to the Bank of
England's surprise decision to slash UK rates by 1.5 points to
their lowest in more than half a century.
For full story double-click on [].
While rate cuts typically weaken a currency's appeal,
analysts said fear of a prolonged recession means investors are
rewarding proactive central banks for efforts to boost growth.
Sterling initially rose on the BoE news and the euro came
off session lows when ECB President Jean-Claude Trichet said he
did not preclude further rate cuts, though investors said the
ECB still looks dangerously behind the curve.
"If you believe that currencies whose central banks are
proactive in targeting a stronger growth policy by cutting
rates aggressively will outperform over the medium term, as I
do, then one cannot like the prospects of the euro over the
short term," said Dustin Reid, senior FX strategist at RBS
Global Banking and Markets in Chicago.
Late afternoon, the euro was down 1.8 percent at $1.2710
<EUR=> and 2.7 percent at 124.21 yen <EURJPY=>.
The pound shed 1.8 percent to $1.5629 <GBP=> after the
BoE's surprisingly large rate reduction. Markets had expected
the BoE to reduce rates to boost a weakening British economy,
but the most aggressive speculation was for a one-point cut.
The Swiss National Bank also surprised investors with an
unscheduled rate cut, lowering them by half a point.
[].
The dollar rose 1.6 percent to 1.1775 Swiss francs <CHF=>,
though it fell 0.9 percent to 97.67 yen <JPY=> as risk-averse
investors continued to exit trades of higher-yielding assets
financed with the Japanese currency.
GLOOM ON GROWTH, US EMPLOYMENT
That unwinding continued to weigh on U.S. stocks, with the
Dow <> falling sharply for a second straight day, as
investors worried about the outlook for the global economy.
The International Monetary Fund said Thursday that
developed countries' economies would contract next year for the
first time since World War II. [].
Investors expect data on Friday to show U.S. employers
slashed jobs for a 10th straight month in October. The
consensus estimate of economists polled by Reuters was for U.S.
nonfarm payrolls to plunge 200,000 after falling 159,000 in
September.
A worsening U.S. economic outlook and a growing credit
crisis prompted the Federal Reserve to start cutting its
benchmark interest rate in late 2007 and last week it took it
down to 1 percent. The ECB has moved more slowly and even
raised rates in July before delivering two half-point cuts in
recent weeks to bring borrowing costs down to 3.25 percent.
Analysts said the preference for proactive monetary policy
and continued risk reduction among investors would likely keep
weighing on the euro and boosting the dollar and yen.
In an environment of normal growth, "rate differentials
matter but given the current situation, rate cuts are seen as a
positive," said Boris Schlossberg, director of foreign exchange
research at GFT Forex. "What matters now is their stimulative
impact."
(Additional reporting by Nick Olivari and Vivianne Rodrigues;
Editing by James Dalgleish)
