* Euro slips ahead of expected ECB rate cut
* Dollar broadly stronger; 4-month high vs yen at 99.67 yen
* Euro zone Q4 GDP confirmed at -1.5 percent q/q
* Focus on details as BoE seen adopting QE
(Adds quotes, updates prices)
By Tamawa Desai
LONDON, March 5 (Reuters) - The euro softened on Thursday as investors awaited a policy decision by the European Central Bank, which is widely expected to cut interest rates further to shore up the ailing euro zone economy.
The Bank of England will also meet to set monetary policy, where as well as an expected half-point rate cut, markets will focus on the extent of new steps to boost the monetary base, or so-called quantitative easing.
The dollar retained its broad strength, rising against a basket of currencies, as underlying worries about financial institutions and a global recession persist, prompting investors to seek refuge in a currency viewed as relatively safer.
It also rose to a fresh four-month high against the yen on worries over a deteriorating economy and deepening political uncertainty in Japan.
The ECB is widely expected to cut interest rates to an all-time low of 1.5 percent from 2 percent on Thursday and slash its 2009 and 2010 economic forecasts to reflect the rapid pace of deterioration in the euro zone.
By 1014 GMT, the euro was down 0.4 percent at $1.2580.
Traders are looking for hints of more rate cuts, as well as the prospect of unconventional measures when ECB President Jean-Claude Trichet speaks after the rate decision.
"With a 50 basis point rate cut expected, the focus will be on whether the ECB will be more aggressive toward quantitative easing and also contributing to help Eastern Europe," said Geoffrey Yu, currency strategist at UBS.
OPTIONS OPEN
ECB Governing Council members Axel Weber and Christian Noyer said on Tuesday the central bank was considering all options to extend its monetary toolbox further.
Data showed the euro zone economy contracted by 1.5 percent in the fourth quarter of 2008, unchanged from a preliminary estimate. It was slightly worse on a year-on-year basis, down 1.3 percent compared with an initial -1.2 percent.
The BoE is expected to cut interest rates by half a point to a record low of 0.5 percent, although there are some views that it may make a smaller cut or make no cut at all.
The BoE has asked permission from the UK government to embark on quantitative easing by purchasing gilts and other commercial assets using new money -- a measure expected to be approved later in the day.
Sterling was flat against the dollar at $1.4159 while the euro was down 0.4 percent at 88.82 pence.
The dollar index was up 0.5 percent at 88.929, hovering near three-year highs.
The dollar rose 0.3 percent to 99.67, its highest in four months, before settling back at 99.41.
Government data on Thursday showed Japanese firms' capital spending tumbled 17.3 percent in October-December from the same period a year earlier, pointing to a downward revision of gross domestic product for the quarter next week.
"Dollar/yen continues to ratchet higher toward the 100 yen level and should break through this mark before the end of the week," said Daragh Maher, deputy head of global foreign exchange research at Calyon, pointing to the economic backdrop.
The Swedish crown extended losses against the euro after one of the country's central bankers said the currency's weakness could be more prolonged and more rate cuts may be needed.
Deputy Governor Svante Oberg also said the crown's weakness should be temporary, but there was a considerable risk the economy would remain weak into next year and that the bank may have to develop unconventional policy measures.
The euro rose to a session high of 11.4520 crowns, up around 0.5 percent on the day, before easing back slightly to 11.4330 crowns, Reuters data showed.
(Editing by Patrick Graham)