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Yesterday, the European Central Bank (ECB) stated they will continue until further notice to supply unlimited funding to EU banks that require it. According to ECB president Jean-Claude Trichet “We have already decided to continue to proceed with the 3-month (refinancing) operation in an unlimited supply of liquidity mode for a number of months, and we did not decide anything more than that,” the news came following the ECB’s decision to keep rates on hold at 1%. The liquidity remains on offer despite fewer bids than expected during this month’s 3 month refinancing operation where ‘only’ €131bln against a forecast of €200bln bids was required.  A positive move for Eurozone and the Euro however Trichet stated it should not be read as any kind of monetary policy signal.  The ECB left its key refinancing rate unchanged at 1.0%, they  the deposit rate which is the floor for euro money market rates at 0.25%, and the marginal lending rate which is the ceiling at 1.75%. The positive sentiment has continued the Euro’s rally and is now trading at GBPEUR: 1.1957 and EURUSD is approaching 1.27s at 1.2693.

Back to the UK and the IMF has warned that the current austerity plans could harm the overall long terms growth prospects for the economy. Official figures on Thursday indicated the first clear evidence of positive momentum in the economy, but city analysts warned of headwinds from planned tax rises and spending cuts to shrink Britain’s huge budget deficit of £155bn, and the IMF has consequently slashed forecasts for the UK. The positive news came in the form of manufacturing data as numbers showed the fastest annual growth in more than 15 years, according to the Office for National Statistics, while economic output in the three months to June was the strongest it has been since the recession, the latest monthly estimates from the National Institute of Economic and Social Research (NIESR) showed.

It was a quiet end to the week in Asia, the USD/JPY had the widest range and that was only 33 pips. The positive lead from Wall Street and the decision by the Obama administration not to label China a currency manipulator should have been bullish for risk but as it’s Friday, dealers have been less than willing to get involved. EUR/USD managed to crack through the1.2700 late in the NY session, but immediately fell back, the lack of momentum suited Asia and the crosses have also been quiet. Ranges EUR/USD 1.2675/1.2702, EUR/CHF 1.3310/45, EUR/GBP .8370/81.

To end the week we have a Canadian jobs number at midday with 20,000 net improvement expected with the overall unemployment to stay on hold at 8.1%.

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