ECB raises interest rates whilst the Bank of England keeps rates at 0.5%

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The European Central Bank, as expected, raised interest rates yesterday from 1.25% to 1.5% as the ECB acted on their promise to "monitor very closely all developments with respect to upside risks to price stability". In his accompanying statement, ECB President Jean-Claude Trichet refused to answer directly questions relating to contagion risk in the Eurozone but reminded everyone that "we're responsible for price stability for the Euro area as a whole. The issues which you're addressing should be addressed to governments as they're responsible."

Reading between the lines, President Trichet is doing his best to hold the Euro together while politicians figure out a longer-term solution. The Euro was steady on the news, regaining the half cent against Sterling it lost prior to the announcement and closing the day marginally higher up against Sterling.

In the UK, the Bank of England monetary policy committee held interest rates at 0.5% for a 29th consecutive month and more or less sent out invitations for the third anniversary of record low interest rates. There was no reaction on the markets to the news or the same statement that has been published every month for the last 14 months either. There was also little to get excited by from UK industrial and manufacturing production figures that were out earlier in the day; manufacturing production grew by a stronger than expected 2.8% in May, while industrial production fell by a disappointing -0.8%.

For the US Dollar yesterday, it was another case of good-for-the-world-bad-for-the-US Dollar as the ADP employment change figure showed an extra 157,000 jobs were created in June. The number was more than double what investors had been expecting. Looking back a month, the lower than expected ADP employment change figure preceded a similarly lower than expected non-farm payrolls number. Based on that precedent, investors have increased their expectations for today's non-farm payroll figure.

It is that US payrolls number that investors will focus on today. Elsewhere on today's agenda, UK producer prices are unlikely to change expectations for Sterling interest rates but the Canadian employment report could well affect the Canadian Dollar.