The pound slipped against other major currencies in early European deals on Friday after a report from the Bank of England showed that the central bank is set to hold auctions under Extended Collateral Term Repo Facility.

The central bank noted that this ECTR activation is intended to mitigate prospective risks to financial stability arising from a market-wide shortage of sterling liquidity by lending to the banking system against the widest range of collateral.

The Bank intends to hold an ECTR auction at least monthly until further notice and said the first auction under the ECTR Facility will be held on 20 June 2012. In its ECTR auctions, the Bank will offer sterling liquidity with a term of 6 months against collateral pre-positioned for use in the Bank's Discount Window Facility (DWF). The minimum bid rate in these auctions will be a spread to Bank Rate of 25 basis points, the central bank added.

Bank of England Governor Mervyn King said in a speech at the Mansion House on Thursday that the case for more stimulus is increasing amid deterioration in the economic outlook.

Measures to ease conditions in the banking sector can complement any further easing in monetary policy. King said the central bank is willing to provide whatever liquidity banks require given the prospect of turbulence ahead.

The BoE is working with Chancellor George Osborne on a a "funding for lending" scheme that would provide funding to banks for an extended period of several years at low rates.

The pound is trading at a 1-week low of 122.20 against the yen, compared to a 2-day high of 123.65 hit in early Asian deals. The next downside target level for the pound-yen pair is seen at 122.0. At yesterday's close, the pound-yen pair was quoted at 123.50.

The pound is trading at 4-day lows of 0.8155 against the euro and 1.4734 against the franc. If the pound weakens further, it may likely target 1.470 against the franc and 0.820 against the euro. The euro-pound and the pound-franc pairs were worth 0.8120 and 1.4798, respectively at yesterday's close.

Against the U.S. dollar, the pound is trading at 1.5478 with 1.546 seen as the near term support level. The pound-dollar pair ended yesterday's trading at 1.5563.

Looking ahead, U.K. trade data for April, Eurozone employment figures for the first quarter and trade data for April are due in the coming hours.

From the U.S., results of the New York Federal Reserve's empire state manufacturing survey for June, industrial production report for May and the preliminary report of the Reuters/University of Michigan's consumer sentiment survey for June are slated for release in the New York morning session.