The dollar rose against the euro and the yen as U.S. productivity unexpectedly accelerated in March while Europe showed signs of an economic slowdown.
The pound fell to a 2 1/2-month low against the dollar after an industry report said U.K. consumer confidence declined last month to the weakest in at least four years.
The U.S. currency strengthened as the Labor Department reported that productivity unexpectedly accelerated in the first quarter, indicating the world's largest economy can expand with lower inflation. The U.S. currency will rise to $1.47 against the euro in three months because the Fed may not lower interest rates any further, according to UBS AG, the world's second-biggest currency trader.
U.S. productivity rose at a 2.2 percent annual rate in the first quarter after a 1.8 percent gain in the prior quarter, the Labor Department said today in Washington. The median forecast of 69 economists surveyed by Bloomberg News was for the measure of worker efficiency to advance at a 1.5 percent annual pace.
The British pound dropped more than 1 percent versus the Canadian dollar and the South African rand after Nationwide Building Society said an index of sentiment in the U.K. declined to the lowest level since data began in May 2004.

EUR/USD fell from $1.5535 to $1.5360/95.
GBP/USD retreated from $1.9730 to a low at $1.9500, before to be back till $1.9540.
USD/JPY prnted high at Y105.60 before sliding to Y104.60.

Interest rate announcements dominate the calendar in Europe on Thursday. German March industrial output is due at 1000GMT and is expected to come in at -0.4% m/m, 4.9% y/y. US data also starts at 1230GMT, when initial US jobless claims are expected to fall 4,000 to 376,000 in the May 3 week, remaining near theelevated level of the previous week.
At 1100GMT, the Bank of England Monetary Policy Committee interest rate is due announcement. This will come against the backdrop of the May Inflation Report. However, the BoE looks unlikely to go for a back-to-back rate cut in May having already cut in April. The ECB interest rate decision is due at 1145GMT and is followed at 1230GMT by the press conference chaired by ECB President Jean-Claude Trichet, which is taking place in Athens. The ECB is clearly expected to leave its key Refi rate unchanged at 4.00%, which will leave the focus on the press conference at 1230GMT.US data continues at 1400GMT with wholesale inventories for March, while at 1430GMT, Treasury Secretary Henry Paulson is due to speak about the US economic stimulus package, in Kansas City, Missouri.

closing
Nikkei 225 +53.22 +0.4% 14,102.48
Topix +15.89 +1.2% 1,393.28
FTSE 100 +45.80 +0.74% 6,261.00
CAC 40 +34.39 +0.68% 5,075.31
Xetra Dax +59.15 +0.84% 7,076.25
DOW -207.05 -1.59% 12,813.78
NASDAQ -44.82 -1.80% 2,438.49
S&P 500 -25.69 -1.81% 1,392.57
10yr Note -0.2600 -0.067% 3.867%
NYMEX Crude Oil +1.69 +1.39% 123.53
Gold -6.50 -0.74% 871.20

Japanese stocks rose to the highest in four months, led by Inpex Holdings Inc. after supply concerns sent crude oil to a record and commodities prices climbed.
Inpex, Japan's biggest oil explorer, had its biggest gain since listing two years ago. Crude rose as much as a 10nth to over $122 per barrel since Japan's stocks last traded on May 2, while Goldman Sachs Group Inc. said oil could reach $200. Mizuho Financial Group Inc., with $5.4 billion in losses related to U.S. mortgages, gained on speculation the housing slump is easing.
Inpex soared 13 percent to 1.28 million yen, the steepest gain since its listing in April 2006. Mitsubishi Corp., which generates more than half of its profit from trading raw materials including oil, rose 6.7%, the sharpest gain since Feb. 4. Idemitsu Kosan Co., the nation's second-largest refiner, soared by a record 11%.
Nomura Holdings Inc., Japan's largest brokerage, gained 2.5%. Smaller rival Daiwa Securities Group Inc. rose 4.9%. Mizuho, Japan's third-biggest bank by market value, gained 2.8%, headed for the highest close since Dec. 26. Mitsubishi UFJ Financial Group Inc., the country's biggest lender, advanced 2.6%.

European stocks rose for the first time in three days after earnings from Lafarge SA, Deutsche Boerse AG and British American Tobacco Plc beat analysts' estimates. U.S. index futures and shares in Asia fell.
Lafarge rallied the most this year after the world's largest cement maker said profit rose, led by emerging markets. Deutsche Boerse climbed after Europe's biggest exchange posted a 58 percent increase in first-quarter profit, and British American Tobacco reached a one-week high.
Nokian Renkaat Oyj, the Nordic region's biggest tiremaker, jumped 14%, the most in the Stoxx 600, after sales in Russia fueled better-than-expected earnings. TomTom NV, a maker of navigation devices, led technology stocks higher on speculation it will receive European approval to buy mapmaker Tele Atlas NV.
Deutsche Boerse gained 3.2 percent to 103.61 euros after first-quarter profit rose to 304.2 million euros ($472.3 million), buoyed by derivatives trading. The exchange was expected to report net income of 254 million euros, according to the median estimate of five analysts surveyed. Commerzbank AG added 1.6%. Germany's second-largest bank by assets said first-quarter profit declined 54 percent to 280 million euros as the collapse of the U.S. subprime market led to writedowns and lower trading income. That was in line with the 282 million-euro median estimate of 13 analysts surveyed. France Telecom SA gained 1.4%. Europe's third-largest phone company said first-quarter sales climbed 1.4 percent to 13 billion euros as mobile subscriber gains in Poland and its home market more than made up for a drop in U.K. wireless revenue. That was in line with analysts' estimates.

Stocks fell Wednesday as investors eyed quarterly results from Cisco and Disney, mixed economic news and record oil prices.
Economic reports showed further weakness in housing and some strength in worker productivity. The productivity report's inflation component eased, but with record oil and gas prices, worries about pricing pressure remain a drag.
The Pending home sales index, a measure of the number of homes under contract to sell, dipped 1% in March, according to an industry report released Wednesday. The decline was in line with expectations.
Worker productivity rose at a better-than-expected 2.2% annual rate in the first quarter, the government reported Wednesday. Unit labor costs, the report's inflation component, slowed to an annual rate of 2.2% from 2.8% in the fourth quarter of 2007.
Walt Disney (DIS) reported earnings of $0.58 per share, topping expectations by seven cents. Cisco Systems (CSCO) beat its earnings estimate by two cents, and guided its fiscal fourth quarter in-line with expectations, but said the U.S. market has softened. Sprint Nextel (S) and Clearwire (CLWR) announced they have entered into a a definitive agreement to combine their wireless broadband businesses to form a new wireless communications company, named Clearwire.