Britain's budget deficit hit its highest level on record for June as tax receipts deteriorated. In fact, the public sector posted a net cash requirement of almost £19 billion, which was less than the £20 billion expected by analysts but still a record high for the month.

Second-quarter GDP was also negative with a 0.8% contraction for the second quarter compared with expectations of a 0.3% decline.

UK retail sales data was stronger than expected with a 1.2% increase for June after a revised 0.9% decline in May. There was also an increase in the BBA mortgage approvals which are now at a 15-month high.

The Bank of England MPC members voted unanimously for unchanged interest rates and no changes to the £125 billion quantitative easing program, with a review scheduled at the August meeting.

Eurozone economic data was weaker than expected with a further small monthly decline of 0.2% in industrial orders to give a 30% annual decline. The Purchasing Managers Index for the services and manufacturing sectors further improved in July, while the German IFO business sentiment index strengthened to 87.3 for July from 85.9 in June.

In the US, initial jobless claims data was close to expectations with an increase of 554,000 for the week after a revised 524,000 the previous week.

Meanwhile, existing home sales data recorded a slightly larger than expected monthly increase despite being at historically very subdued levels. Also, in the housing market, US house-price data recorded a 0.9% monthly increase for May, which lowered the annual decline to 5.9%.

In his semi-annual testimony to Congress, Federal Reserve chairman Bernanke said there were tentative signs of stabilisation in the economy and that the pace of decline appeared to have slowed.

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