Sterling firmer

Sterling has gained some ground ahead of the Bank of England’s latest interest rate announcement this Thursday, with the pound up almost a cent against the dollar to trade above $1.22 and around half a penny firmer against the euro at about 83.5p. The single currency, meanwhile, is trading a little shy of $1.0250 against the dollar this morning

Equity markets were little changed yesterday with both European and US stocks closing broadly flat, while government bond yields continue to nudge down with German 10-year yields dipping below 0.75% and equivalent US yields down to 2.55%

The ISM index of manufacturing activity in the US slipped again in July, pointing to a deceleration in the pace of growth in the sector, while input price pressures eased for a fourth month running

The Euro area economy expanded by a stronger than expected 0.7% in the second quarter of the year according to the preliminary estimate published last Friday, although the year-on-year rate of growth eased to 4% from 5.4% in the first quarter. Meanwhile, the annual rate of consumer price inflation nudged up to 8.9% last month, according to the flash reading, from 8.6% in June

The Bank of England announces its latest monetary policy decision this Thursday – the market is attaching a very high probability to a 50bps increase in interest rates (to 1.75%) following a 25bps hike at each of the central bank’s four previous meetings

On the economic data front this week – services PMIs are due in the main economies on Wednesday, while Friday sees the release of the July employment (payrolls) report in the US