With American markets closed, UK and European data was in the spotlight, and once again, the news was disappointing. Growth in the UK’s services sector slowed to an eight-month low in June and the eurozone services sector shrank once more. Consequently, markets have now priced in an interest rate cut when the ECB concludes its policy meeting, and the Bank of England is also expected to extend its program of quantitative easing.

Sterling

Growth in the UK’s services sector slowed to an eight-month low, according to data released, with analysts citing the extra Jubilee holidays and suppressed demand as the reasons for the slowdown. This latest survey will come as a huge disappointment to policymakers, given the reliance of the UK economy on a strong services sector. The news follows on from similar data that showed both the manufacturing and construction sectors contracted, adding to the picture of an economy in recession

US dollar

American markets were closed for the July 4th Independence Day holiday. Nevertheless, the IMF downgraded its growth forecasts for the world’s largest economy to two per cent for 2012 and to 2.4 per cent for 2013. The IMF cited both the upcoming presidential elections and the impact of the euro zone debt crisis as the main reasons for the downgrade.

Euro

A string of weak economic data released prior to an ECB meeting had fuelled further speculation that European policymakers were likely to cut interest rates. The service output index came in at 46.4, which was well below the 50 and above level required to highlight expansion. Data released from the retail sector also disappointed with May’s results showing a weak increase of just six per cent. As was widely expected, the ECB cut its main refinancing rate from the current one per cent level to a record low of 0.75 per cent in order to stimulate more spending and boost economic growth.

Japanese yen

The Japanese yen saw little activity after the Bank of Japan released its latest assessment of the economy. In a survey of its nine regional economies, the data showed strong levels of private consumption and spending. The private sector has helped to support growth in the country.

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