(Changes dateline, byline, updates prices, adds quotes)
By Simon Falush
LONDON, Jan 10 (Reuters) - Sterling fell broadly on Thursday on growing concerns about the health of the economy and growing prospects of a rate cut but other major currencies held steady ahead of rate decisions by the Bank of England and the ECB.
The balance of expectations has swung marginally in favour of a 25 basis point cut from the BoE to 5.25 percent but the European Central Bank is widely expected to keep rates on hold at 4 percent.
Investors will also closely scrutinise comments from ECB President Jean-Claude Trichet at the press conference following the decision, to see whether he will maintain his hawkish line.
For the BoE, markets are pricing in a roughly two-in-three chance of a rate cut, up from about a 30 percent chance at the end of last week.
"There has been weakness in the pound as expectations of a rate cut have moved sharply up after weak retailer trading statements and poor consumer confidence data," said Michael Klawitter, currency strategist at Dresdner Kleinwort in Frankfurt.
The euro rose to a fresh all-time peak against the pound EURGBP= as high as 75.14 pence. Sterling fell as low as $1.9542 GBP=, a 10-month low.
Sterling fell further on Wednesday after Marks & Spencer (MKS.L), Britain's largest clothing retailer, reported unexpectedly weak sales, stirring talk that weak consumption could lead to a sharp economic slowdown.
The euro edged up 0.1 percent to $1.4674 EUR=, above a one-week low of $1.4638 hit the previous day.
Some analysts think that hawkish comments from Trichet will be brushed aside with weaker economic data leading to the prospect of falling euro zone rates later in the year.
"It's going to be a case of I hear but I don't listen," said Dresdner Kleinwort's Klawitter.
"The evidence of slowing growth in the euro zone is too strong and hawkish comments will not provide a lift for the euro. If he's not hawkish it will be negative for the euro."
The yen edged up from overnight lows against the dollar to trade flat at 109.85 yen JPY= as Tokyo shares slid more than 1 percent and kept investors cautious of holding risky positions such as carry trades.
In carry trades, investors borrow low-yielding currencies like the yen to fund investment in higher-yielding assets. But such risky trades tend to be unwound when stock markets slump and market volatility rises.
Caution ahead of Thursday's speech by Federal Reserve Chairman Ben Bernanke on the U.S. economy was also keeping currencies confined to tight ranges.
"Bernanke's speech will be closely watched for guidance on two key fronts: the U.S. housing market outlook and chances of a U.S. recession, and the prospect of a 50 bps rate cut at the (January) FOMC meeting," said Tullett Prebon in a client note.