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Global Exchange

Exchange Rates for Tuesday 7th July 2015

Sterling had a solid day yesterday despite growth forecasts downgraded by Bank of England

Unlike Team GB, which (depending on who you listen too) has an unfair advantage in hosting the games; the French believe our cyclists have magic (round) wheels apparently. As for Sterling, it is not an accusation that it has to contend with. The best it can usually achieve these days is to look less horrible than the opposition and, by managing expectations downwards, to avoid disappointing investors. It managed to do both of those yesterday with the assistance of the Bank of England.

In its quarterly inflation report the Bank of England revised its forecast for UK economic growth to zero for the current year and said it would be two years before the situation began to normalise with 2% growth. Had they come out of the blue, numbers like that would have put Sterling to the sword. However, the downgrade had been so well flagged that it caused hardly a ripple. 

What did help Sterling was Governor King's comment that an interest rate cut would in all probability be "counter productive". It was not exactly a promise that the Bank Rate would not cut interest rates but it was good enough to change the minds of investors who were expecting a cut in the next month or two.

The removal of the rate cut threat alleviated some of the pressure that Sterling had felt since the European Central Bank unveiled its grand plan to save the Euro. Sterling is up the best part of a US cent, at least half a Euro cent and three quarters of a Yen. It was better against the commodity dollars, just.

The antipodean dollars were both affected overnight by jobs figures. There was a -0.1% fall in NZ employment and an increase in the rate of unemployment to 6.8% which cost the New Zealand Dollar a quick cent against Sterling. This preceded an increase of 14,000 new jobs in Australia that left unemployment at 5.2%; the Aussie Dollar responded by strengthening by a little over half a cent against Sterling.

There is no top-tier data on today's timetable with the UK balance of trade this morning is the only serious European statistic. The Canadian and US trade figures follow after lunch, together with Canada's new housing price index and American weekly jobless claims. 

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