The Bank of England left its monetary policy unchanged as expected, while the European Central Bank raised interest rates by 25-basis points taking the main refinancing rate to 1.5 per cent.

Sterling

The Bank of England left interest rates on hold at 0.5 per cent, while maintaining its £200-billion total for its quantitative easing measures. In other news, manufacturing output in the UK rose at its fastest pace in over a year. The data has been skewed and while it lent initial support to sterling, momentum was weak. The outlook for this sector of the UK economy continues to suggest a moderating pace of growth.

US dollar

The ADP employment report showed 157k new jobs were added in June. The better than expected release prompted economists to revise higher their call for non-farm payrolls, consensus forecast now looks for a gain of 125k instead of the 90k that was the forecast seen prior to the ADP release. The dollar immediately rose after the release and investors could continue to buy the dollar as excitement over a strong employment read grows.

Euro

The European Central Bank delivered as promised a 25-basis point rate increase, which took the main refinancing rate to 1.5 per cent. There was initial confusion in reporting what ECB president Jean-Claude Trichet said during his press conference that prompted a sudden drop in the euro. It was reported that Mr Trichet had left out the catchphrase ‘monitoring very closely’ inflation, when indeed he had signalled that inflation did indeed need monitoring. The confusion rattled markets initially, particularly since he had taken a more cautious tone on growth saying that the pace is expected to moderate, but that a recovery remained intact. Mr Trichet also signalled that the Euro Central Bank would suspend Portugal’s rating requirement, as it has done for Greece.

Japanese yen

The Japanese yen has held steady again in the overnight session. Economic data showing Japan’s currency account surplus falling 51.7 per cent, were better than the decline of 70.8 per cent expected. The data showed exports declining for a second consecutive month as energy imports rose. The data is still clearly skewed by the impact of the March disaster and is expected to improve in the coming months

Travelex Global Business Payments Malta, freephone: 800 733 22) www.travelex.com/mt/

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